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

• 38 (1) Clause 111(1)(e)(ii)(A) of the Act is replaced by the following:

  • (A) the amount required by subsection 127(8), 127.44(11), 127.45(8), 127.48(12), 127.49(8) or 127.491(12) in respect of the partnership to be added in computing the investment tax credit, the CCUS tax credit (as defined in subsection 127.44(1)), the clean technology investment tax credit (as defined in subsection 127.45(1)), the clean hydrogen tax credit (as defined in subsection 127.48(1)), the CTM investment tax credit (as defined in subsection 127.49(1)) or the clean electricity investment tax credit (as defined in subsection 127.491(1)) of the taxpayer for the taxation year,

• (2) Paragraph 111(2)(b) of the Act is replaced by the following:

  • (b) paragraph (1.1)(b) is to be read as follows:

    • “(b) the amount, if any, by which

      • (i) the amount claimed under paragraph (1)(b) in respect of the taxpayer’s net capital losses for the particular year

      exceeds the total of

      • (ii) all amounts in respect of the taxpayer’s net capital losses that, using the formula in subparagraph (a)(ii), would be required to be claimed under paragraph (1)(b) for the particular year to produce the amount determined under paragraph (a) for the particular year, and

      • (iii) all amounts each of which is an amount deducted under section 110.6, 110.61 or 110.62 in computing the taxpayer’s taxable income for a taxation year, except to the extent that, where the particular year is the year in which the taxpayer died, the amount, if any, by which the amount determined under subparagraph (i) in respect of the taxpayer for the immediately preceding taxation year exceeds the amount so determined under subparagraph (ii).”

• (3) Paragraph (b) of the description of E in the definition non-capital loss in subsection 111(8) of the Act is replaced by the following:

  • (b) an amount deducted under paragraph (1)(a.1) or (b) or section 110.6, 110.61 or 110.62, or deductible under any of paragraphs 110(1)(d) to (g) and (k), section 112 and subsections 113(1) and 138(6), in computing the taxpayer’s taxable income for the year, or

• (4) Subsection (1) is deemed to have come into force on April 16, 2024.

• (5) Subsections (2) and (3) are deemed to have come into force on January 1, 2024.

• 39 (1) Section 111.1 of the Act is replaced by the following:

  Marginal note:Order of applying provisions

  • 111.1 (1) In computing an individual’s taxable income for a taxation year, the provisions of this Division shall be applied in the following order: sections 110, 110.2, 111, 110.61, 110.62, 110.6 and 110.7.

  • Marginal note:No double deduction

    (2) No amount may be deducted for a taxation year of an individual, under section 110.6, in respect of any portion of a taxable capital gain to the extent that the portion of the taxable capital gain has been deducted under section 110.61 or 110.62.

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

• 40 (1) Subsections 112(2.31) to (2.34) of the Act are repealed.

• (2) The portion of subparagraph 112(3.2)(a)(iii) of the Act before clause (A) is replaced by the following:

  • (iii) if the trust is an individual’s graduated rate estate, the share was acquired as a consequence of the individual’s death and the disposition occurs during the trust’s first three taxation years, 1/2 of the lesser of

• (3) Subsection (1) applies in respect of dividends received after 2024.

• (4) Subsection (2) applies to taxation years of graduated rate estates of individuals who died on or after August 12, 2024.

• 41 (1) Paragraph 117.1(2)(c) of the Act is replaced by the following:

  • (c) the amount of $625,000 referred to in paragraph 110.6(2)(a), for a taxation year that begins after 2025;

• (2) Subsection (1) applies to taxation years that begin after 2024.

• 42 (1) The definition qualifying expenditure in subsection 118.041(1) of the Act is amended by striking out “or” at the end of paragraph (i), by adding “or” at the end of paragraph (j) and by adding the following after paragraph (j):

  • (k) that is included in computing a deduction under section 118.2 for any taxpayer for any taxation year. (dépense admissible)

• (2) Subsection 118.041(4) of the Act is repealed.

• (3) Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2026.

43 Section 118.1 of the Act is amended by adding the following after subsection (28):

• 44 (1) Subsection 122.62(10) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by adding the following after paragraph (b):

  • (c) at the beginning of the month, the person satisfied the conditions set out in paragraphs (c) to (e) of the definition eligible individual in section 122.6.

• (2) Subsection (1) applies to months that begin after August 31, 2025.

• 45 (1) The Act is amended by adding the following after section 122.92:

  SUBDIVISION A.7Personal Support Workers Tax Credit

  Marginal note:Definitions

  • 122.93 (1) The following definitions apply in this section.

    eligible health care establishment

    eligible health care establishment means a hospital, nursing care facility, residential care facility, community care facility for the elderly, home health care establishment and similar regulated health care establishments. (établissement de soins de santé admissible)

    eligible personal support worker

    eligible personal support worker, for a taxation year, means an individual

    • (a) who performs duties of employment in the capacity of a personal support worker for an eligible health care establishment during the taxation year (in this definition referred to as the “duties for the year”);

    • (b) who, in the course of performing the duties for the year, ordinarily provides one-on-one care and essential support to optimize and maintain another individual’s health, well-being, safety, autonomy and comfort consistent with that other individual’s health care needs as directed by a regulated health care professional or a provincial or community health organization; and

    • (c) whose main duties of employment, in respect of the duties for the year, include assisting individuals with activities of daily living and mobilization. (préposé aux services de soutien à la personne admissible)

    return of income

    return of income, filed by an eligible personal support worker for a taxation year, means a return of income (other than a return of income under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) that is required to be filed for the taxation year or that would be required to be filed if the eligible personal support worker had tax payable under this Part for the taxation year. (déclaration de revenu)

    yearly eligible remuneration

    yearly eligible remuneration of an individual for a taxation year means the total of all amounts, each of which

    • (a) would be, in the absence of section 8 and paragraph 81(1)(a), the individual’s income for the taxation year from an office or employment as an eligible personal support worker for an eligible health care establishment in a province, other than duties performed in Newfoundland and Labrador, the Northwest Territories and British Columbia; and

    • (b) is certified by the individual’s employer in the prescribed form and manner to be an amount that satisfies the description under paragraph (a). (rémunération annuelle admissible)

  • Marginal note:Deemed overpayment — yearly eligible remuneration

    (2) An eligible personal support worker, for a taxation year that begins after 2025 and that ends before 2031, who files a return of income for the taxation year and makes a claim under this subsection, is deemed to have paid, at the end of the taxation year, on account of tax payable under this Part for the taxation year, an amount equal to the lesser of

    • (a) $1,100, and

    • (b) 5% of the eligible personal support worker’s yearly eligible remuneration for the taxation year.

  • Marginal note:Effect of bankruptcy

    (3) For the purpose of this Subdivision, if an individual becomes bankrupt in a particular calendar year

    • (a) despite subsection 128(2), any reference to a taxation year of the individual (other than in this subsection) is deemed to be a reference to the particular calendar year; and

    • (b) the individual’s yearly eligible remuneration for the taxation year ending on December 31 of the particular calendar year is deemed to include the individual’s yearly eligible remuneration for the taxation year that begins on January 1 of the particular calendar year.

  • Marginal note:Special rules in the event of death

    (4) For the purpose of this Subdivision, if an individual dies before the end of a calendar year, any return of income filed by a legal representative of the individual is deemed to be a return of income filed by the individual.

  • Marginal note:Requirement — certification of yearly eligible remuneration

    (5) Every employer who pays an amount described in paragraph (a) of the definition yearly eligible remuneration in subsection (1) to an individual in a taxation year must provide the certification described in paragraph (b) of that definition in respect of the total amount described in paragraph (a) of that definition for that individual for that year.

• (2) Subsection (1) applies to the 2026 and subsequent taxation years.

• 46 (1) Subclause 126(1)(b)(ii)(A)(III) of the Act is replaced by the following:

  • (III) the total of all amounts each of which is an amount deducted under section 110.6, 110.61 or 110.62 or paragraph 111(1)(b), or deductible under any of paragraphs 110(1)(d) to (g) and sections 112 and 113, in computing the taxpayer’s taxable income for the year, and

• (2) Subclause 126(2.1)(a)(ii)(A)(III) of the Act is replaced by the following:

  • (III) the total of all amounts each of which is an amount deducted under section 110.6, 110.61 or 110.62 or paragraph 111(1)(b), or deductible under any of paragraphs 110(1)(d) to (g) and sections 112 and 113, in computing the taxpayer’s taxable income for the year, and

• (3) Subparagraph 126(3)(b)(iii) of the Act is replaced by the following:

  • (iii) the total of all amounts each of which is an amount deducted under section 110.6, 110.61 or 110.62 or paragraph 111(1)(b), or deductible under any of paragraphs 110(1)(d) to (d.3), (f) and (g), in computing the taxpayer’s taxable income for the year,

• (4) Subsection 126(5.1) of the Act is replaced by the following:

  • Marginal note:Deductions for specified capital gains

    (5.1) If in a taxation year an individual has claimed a deduction under section 110.6, 110.61 or 110.62 in computing the individual’s taxable income for the year, for the purposes of this section the individual shall be deemed to have claimed the deduction under section 110.6, 110.61 or 110.62 in respect of such taxable capital gains or portion thereof as the individual may specify in the individual’s return of income required to be filed pursuant to section 150 for the year or, where the individual has failed to so specify, in respect of such taxable capital gains as the Minister may specify in respect of the taxpayer for the year.

• (5) Paragraph (g) of the definition non-business-income tax in subsection 126(7) of the Act is replaced by the following:

  • (g) that can reasonably be attributed to a taxable capital gain or a portion thereof in respect of which the taxpayer or a spouse or common-law partner of the taxpayer has claimed a deduction under section 110.6, 110.61 or 110.62, or

• (6) Subparagraph 126(9)(a)(ii) of the Act is replaced by the following:

  • (ii) for the purpose of subparagraph (1)(b)(i), any portion of income in respect of which an amount was deducted under section 110.6, 110.61 or 110.62 in computing the taxpayer’s income, or

• (7) Subsections (1) to (6) are deemed to have come into force on January 1, 2024.

• 47 (1) The definition critical mineral in subsection 127(9) of the Act is replaced by the following:

  critical mineral

  critical mineral means bismuth, cesium, chromium, cobalt, copper, fluorspar, gallium, germanium, graphite, indium, lithium, magnesium, manganese, molybdenum, nickel, niobium, phosphate, a platinum group metal, a rare earth element, scandium, tantalum, tellurium, tin, titanium, tungsten, uranium, vanadium or zinc; (minéral critique)

• (2) The definition first term shared-use equipment in subsection 127(9) of the Act is replaced by the following:

  first term shared-use-equipment

  first term shared-use-equipment, of a taxpayer, means depreciable property of the taxpayer (other than prescribed depreciable property of a taxpayer) that is used by the taxpayer, during its operating time in the period (in this subsection and subsection (11.5) referred to as the “first period”) beginning at the time the property was acquired by the taxpayer and ending at the end of the taxpayer’s first taxation year ending at least 12 months after that time, primarily for the prosecution of scientific research and experimental development in Canada, but does not include general purpose office equipment or furniture; (matériel à vocations multiples de première période)

• (3) The definition government assistance in subsection 127(9) of the Act is replaced by the following:

  government assistance

  government assistance means assistance from a government, municipality or other public authority whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance, other than as an excluded loan (as defined in subsection 12(11)), as a deduction under subsection (5) or (6) or as a deemed payment on account of tax payable under subsection 127.44(2), 127.45(2), 127.48(2), 127.49(2) or 127.491(2); (aide gouvernementale)

• (4) The definition second term shared-use equipment in subsection 127(9) of the Act is replaced by the following:

  second term shared-use-equipment

  second term shared-use-equipment, of a taxpayer, means property of the taxpayer that was first term shared-use-equipment and that is used by the taxpayer, during its operating time in the period (in this subsection and subsection (11.5) referred to as the “second period”) beginning at the time the property was acquired by the taxpayer and ending at the end of the taxpayer’s first taxation year ending at least 24 months after that time, primarily for the prosecution of scientific research and experimental development in Canada; (matériel à vocations multiples de deuxième période)

• (5) Paragraph (b) of the definition contract payment in subsection 127(9) of the Act is replaced by the following:

  • (b) an amount, other than a prescribed amount, payable by a Canadian government or municipality or other Canadian public authority or by a person exempt, because of section 149, from tax under this Part on all or part of the person’s taxable income for scientific research and experimental development to be performed for it or on its behalf; (paiement contractuel)

• (6) Paragraph (a) of the definition flow-through mining expenditure in subsection 127(9) of the Act is replaced by the following:

  • (a) that is a Canadian exploration expense incurred by a corporation after March 2025 and before 2028 (including, for greater certainty, an expense that is deemed by subsection 66(12.66) to be incurred before 2028) in conducting mining exploration activity from or above the surface of the earth for the purpose of determining the existence, location, extent or quality of a mineral resource described in paragraph (a) or (d) of the definition mineral resource in subsection 248(1),

• (7) Paragraphs (c) and (d) of the definition flow-through mining expenditure in subsection 127(9) of the Act are replaced by the following:

  • (c) an amount in respect of which is renounced in accordance with subsection 66(12.6) by the corporation to the taxpayer (or a partnership of which the taxpayer is a member) under an agreement described in that subsection and made after March 2025 and before April 2027,

  • (d) that is not an expense that was renounced under subsection 66(12.6) to the corporation (or a partnership of which the corporation is a member), unless that renunciation was under an agreement described in that subsection and made after March 2025 and before April 2027, and

• (8) Paragraph (a) of the definition qualified expenditure in subsection 127(9) of the Act is amended by striking out “or” at the end of subparagraph (i) and at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

  • (iii) an expenditure for first term shared-use-equipment or second term shared-use-equipment, or

  • (iv) an expenditure described in paragraph 37(1)(b), or

• (9) Paragraph (d) of the definition qualified expenditure in subsection 127(9) of the Act is repealed.

• (10) Subsection 127(9) is amended by adding the following in alphabetical order:

  consolidated financial statements

  consolidated financial statements means financial statements in which the assets, liabilities, income, expenses and cash flows of the members of a group are presented as those of a single economic entity; (états financiers consolidés)

  consolidated group

  consolidated group means a group of entities in respect of which an ultimate parent entity is required to prepare consolidated financial statements, or would be so required if equity interests in any of the entities were traded on a public securities exchange; (groupe consolidé)

  eligible Canadian public corporation

  eligible Canadian public corporation, at the relevant time in a taxation year, means

  • (a) a corporation that

    • (i) is resident in Canada,

    • (ii) is a public corporation, or would be a public corporation if the words “designated stock exchange in Canada” in paragraph (a) of the definition public corporation in subsection 89(1) were read as “designated stock exchange”,

    • (iii) is not controlled, directly or indirectly in any manner whatever, by one or more non-resident persons, and

    • (iv) would not, if each share of its capital stock that is owned by a non-resident person (as determined, absent actual knowledge, based on publicly available information, including information filed pursuant to applicable securities laws before the year) were owned by a particular person, be controlled by the particular person, or

  • (b) an eligible subsidiary; (société publique canadienne admissible)

  eligible subsidiary

  eligible subsidiary means a corporation

  • (a) that is resident in Canada, and

  • (b) not less than 90% of the issued shares of each class of the capital stock of which is owned, directly or indirectly, by one or more corporations that are eligible Canadian public corporations because of paragraph (a) of that definition; (filiale admissible)

  entity

  entity means

  • (a) a corporation, partnership or trust, or

  • (b) any other arrangement, association, organization or body whether registered or unregistered for which separate financial accounts are prepared; (entité)

  financial statements

  financial statements means financial statements prepared in accordance with acceptable accounting standards, as defined in subsection 18.21(1); (états financiers)

  fiscal year

  fiscal year means an annual accounting period in respect of which a corporation prepares its financial statements; (exercice)

  ultimate parent entity

  ultimate parent entity, in respect of a group of entities, means the member of the group that would be the ultimate parent entity, as defined in subsection 233.8(1), of the group if the group were a multinational enterprise group as defined in subsection 233.8(1). (entité mère ultime)

• (11) The portion of subsection 127(10.1) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Additions to investment tax credit

    (10.1) For the purposes of paragraph (e) of the definition investment tax credit in subsection (9), if a corporation was throughout a taxation year a Canadian-controlled private corporation or an eligible Canadian public corporation, there shall be added in computing the corporation’s investment tax credit at the end of the year the amount that is 20% of the least of

• (12) Subsection 127(10.2) is replaced by the following:

  • Marginal note:Expenditure limit — CCPC

    (10.2) For the purpose of subsection (10.1), a particular Canadian-controlled private corporation’s expenditure limit for a particular taxation year is the amount determined by the formula

    $6 million × [($60 million − A) ÷ $60 million]

    where

    A

    is

    • (a) nil, if the following amount is less than or equal to $15 million:

      • (i) if the particular corporation is not associated with any other corporation in the particular taxation year, the amount that is its taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) for its immediately preceding taxation year, and

      • (ii) if the particular corporation is associated with one or more other corporations in the particular taxation year, the amount that is the total of all amounts, each of which is the taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) of the particular corporation for its, or of one of the other corporations for its, last taxation year that ended in the last calendar year that ended before the end of the particular taxation year, and

    • (b) in any other case, the lesser of $60 million and the amount by which the amount determined under subparagraph (a)(i) or (ii), as the case may be, exceeds $15 million.

• (13) Subsection 127(10.3) of the Act is replaced by the following:

  • Marginal note:Shared limit — associated CCPCs

    (10.3) If all of the Canadian-controlled private corporations that are associated with each other in a taxation year file with the Minister in prescribed form an agreement under which, for the purpose of subsection (10.1), they allocate an amount to one or more of them for the year, the expenditure limit for the year of each of the corporations is the amount so allocated if the total of the amounts so allocated does not exceed

    • (a) unless subsection (10.32) applies, the amount determined for the year by the formula in subsection (10.2); or

    • (b) if subsection (10.32) applies, the amount determined for the year under that subsection.

  • Marginal note:Revenue election for single CCPC

    (10.31) Despite subsection (10.2), for the purpose of subsection (10.1), if throughout a taxation year a particular Canadian-controlled private corporation is not associated with another corporation and the particular corporation files with the Minister in the prescribed form and manner, the particular corporation may elect that its expenditure limit for the year be determined under subsection (10.6) as if the particular corporation were an eligible Canadian public corporation that is not a member of a consolidated group.

  • Marginal note:Revenue election for CCPC having associated corporations

    (10.32) Despite subsection (10.2), and subject to subsections (10.21) to (10.4), for the purpose of subsection (10.1), if at any time in a taxation year one or more particular Canadian-controlled private corporations are members of a group of associated corporations and all those particular corporations file with the Minister a prescribed form, those particular corporations may elect that the expenditure limit for the particular corporations be determined for the year under subsection (10.6), calculated as if

    • (a) each Canadian-controlled private corporation in the group were an eligible Canadian public corporation;

    • (b) the group were a consolidated group;

    • (c) the amount determined under subparagraph (a)(ii) of the description of A in subsection (10.6) were the total of all amounts, each of which is the average, over the period of three fiscal years immediately preceding and ending in the last calendar year that ended before the end of the particular taxation year, of annual revenue reflected in the financial statements of each corporation that is a member of the group; and

    • (d) the annual revenue described in paragraph (c)

      • (i) must include each corporation’s reasonable share of annual revenue reflected in the financial statements of any partnership or trust in which the corporation held an interest, and

      • (ii) may include reasonable adjustments to reflect the annual revenue of the group as that of a single economic entity.

• (14) Section 127(10.6) of the Act is replaced by the following:

  • Marginal note:Expenditure limit determination in certain cases

    (10.5) Notwithstanding any other provision of this section,

    • (a) where a Canadian-controlled private corporation (in this paragraph referred to as the “first corporation”) has more than one taxation year ending in the same calendar year and it is associated in two or more of those taxation years with another Canadian-controlled private corporation that has a taxation year ending in that calendar year, the expenditure limit of the first corporation for each taxation year in which it is associated with the other corporation ending in that calendar year is, subject to the application of paragraph (b), an amount equal to its expenditure limit for the first such taxation year determined without reference to paragraph (b); and

    • (b) where a Canadian-controlled private corporation has a taxation year that is less than 51 weeks, its expenditure limit for the year is that proportion of its expenditure limit for the year determined without reference to this paragraph that the number of days in the year is of 365.

  • Marginal note:Expenditure limit — ECPC

    (10.6) For the purpose of subsection (10.1), a particular eligible Canadian public corporation’s expenditure limit for a particular taxation year is the amount determined by the formula

    $6 million × [($60 million − A) ÷ $60 million]

    where

    A

    is

    • (a) nil, if the following amount is less than or equal to $15 million:

      • (i) if the particular corporation is not a member of a consolidated group in the particular taxation year, the amount that is the average, over the period of three fiscal years immediately preceding and ending before the particular taxation year, of its annual revenue based on the amounts reflected in the financial statements of the corporation, and

      • (ii) if the particular corporation is a member of a consolidated group in the particular taxation year, the amount that is the average, over the period of three fiscal years immediately preceding and ending before the particular taxation year, of the annual revenue reflected in the consolidated financial statements of the group, and

    • (b) in any other case, the lesser of $60 million and the amount by which the amount determined under subparagraph (a)(i) or (ii), as the case may be, exceeds $15 million.

  • Marginal note:Expenditure limits — consolidated ECPCs

    (10.61) Despite subsection (10.6), the expenditure limit for a taxation year of an eligible Canadian public corporation that is, at any time in the year, a member of a consolidated group is, except as otherwise provided in this section, nil.

  • Marginal note:Consolidated ECPCs

    (10.62) If all of the eligible Canadian public corporations that are members of a consolidated group file with the Minister in prescribed form an agreement under which, for the purpose of subsection (10.1), they allocate an amount to one or more of them for the year and the amount so allocated or the total of the amounts so allocated, as the case may be, does not exceed the amount determined for the year by the formula in subsection (10.6), the expenditure limit for the year of each of the corporations is the amount so allocated to it.

  • Marginal note:Failure to file agreement

    (10.63) If any of the eligible Canadian public corporations that are members of a consolidated group fails to file with the Minister an agreement as contemplated by subsection (10.62) within 30 days after notice in writing by the Minister is forwarded to any of them that such an agreement is required for the purposes of this Part, the Minister must, for the purpose of subsection (10.1), allocate an amount to one or more of them for the year, which amount or the total of which amounts, as the case may be, must equal the amount determined for the year by the formula in subsection (10.6), and in any such case the expenditure limit for the year of each of the corporations is the amount so allocated to it.

  • Marginal note:Determinations in certain cases

    (10.64) Despite any other provision of this section,

    • (a) where an eligible Canadian public corporation (in this paragraph referred to as the “first corporation”) has more than one taxation year ending in the same calendar year and in two or more of those taxation years it is a member of a consolidated group in which another eligible Canadian public corporation has a taxation year ending in that calendar year, the expenditure limit of the first corporation for each taxation year in which it is in the same group as the other corporation ending in that calendar year is, subject to the application of paragraph (b), an amount equal to its expenditure limit for the first such taxation year determined without reference to paragraph (b);

    • (b) where an eligible Canadian public corporation has a taxation year that is less than 51 weeks, its expenditure limit for the year is that proportion of its expenditure limit for the year determined without reference to this paragraph that the number of days in the year is of 365;

    • (c) for the purpose of subparagraph (a)(i) of the description of A in subsection (10.6), where one or more of the fiscal years of an eligible Canadian public corporation is less than 51 weeks, the revenue reflected in the financial statements for each of those fiscal years must be determined by multiplying that amount by the ratio that 365 is of the number of days in that year;

    • (d) for the purpose of subparagraph (a)(ii) of the description of A in subsection (10.6), where one or more of the fiscal years of the ultimate parent entity of a consolidated group is less than 51 weeks, the revenue reflected in the consolidated financial statements of the entity for each of those fiscal years must be determined by multiplying that amount by the ratio that 365 is of the number of days in that year; and

    • (e) for the purpose of subparagraphs (a)(i) and (ii) of the description of A in the formula in subsection (10.6),

      • (i) the average annual revenue referred to in each subparagraph is to be calculated over the actual number of fiscal years if there are less than three fiscal periods immediately preceding and ending before the particular taxation year, and

      • (ii) if paragraph (10.32)(c) applies, the average annual revenue referred to in that paragraph is to be calculated over the actual number of fiscal years if there are less than three fiscal years immediately preceding and ending in the calendar year referred to in that paragraph.

• (15) Paragraph 127(11.1)(c.1) of the Act is repealed.

• (16) Subsection 127(11.2) of the Act is replaced by the following:

  • Marginal note:Time of acquisition

    (11.2) In applying subsections (5), (7) and (8), paragraphs (a) and (a.1) of the definition investment tax credit in subsection (9) and section 127.1, qualified property and first term shared-use-equipment are deemed not to have been acquired by a taxpayer — and expenditures incurred to acquire property described in paragraph 37(1)(b) are deemed not to have been incurred — before the property is considered to have become available for use by the taxpayer, determined without reference to paragraphs 13(27)(c) and (28)(d).

• (17) Subsection 127(11.5) of the Act is replaced by the following:

  • Marginal note:Adjustments to qualified expenditures

    (11.5) For the purposes of the definition qualified expenditure in subsection (9),

    • (a) the amount of an expenditure (other than a prescribed proxy amount) incurred by a taxpayer in a taxation year is deemed to be the amount of the expenditure determined without reference to subsections 13(7.1) and (7.4) and after the application of subsection (11.6); and

    • (b) the amount of an expenditure incurred by a taxpayer in the taxation year that ends coincidentally with the end of the first period (within the meaning assigned in the definition first term shared-use-equipment in subsection (9)) or the second period (within the meaning assigned in the definition second term shared-use-equipment in subsection (9)) in respect of first term shared-use-equipment or second term shared-use-equipment, respectively, of the taxpayer is deemed to be 1/4 of the capital cost of the equipment determined after the application of subsection (11.6) in accordance with the following rules:

      • (i) the capital cost to the taxpayer must be computed as if no amount were added because of section 21, and

      • (ii) the capital cost to the taxpayer is determined without reference to subsections 13(7.1) and (7.4).

• (18) The portion of subsection 127(11.6) of the Act after paragraph (b) and before paragraph (c) is replaced by the following:

  the amount of the expenditure incurred by the taxpayer for the service or property and the capital cost to the taxpayer of the property are deemed to be

• (19) Subparagraph 127(11.6)(d)(i) of the Act is replaced by the following:

  • (i) the capital cost to the taxpayer of the property otherwise determined, and

• (20) Subsection 127(11.8) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by adding the following after paragraph (b):

  • (c) the leasing of a property is deemed to be the rendering of a service.

• (21) Subsection 127(33) of the Act is replaced by the following:

  • Marginal note:Certain non-arm’s length transfers

    (33) Subsections (27) to (29), (34) and (35) do not apply to a taxpayer or partnership (in this subsection referred to as the “transferor”) that disposes of a property to a person or partnership (in this subsection and subsections (34) and (35) referred to as the “purchaser”), that does not deal at arm’s length with the transferor, if the purchaser acquired the property in circumstances where the cost of the property to the purchaser would have been an expenditure of the purchaser described in subclause 37(8)(a)(ii)(A)(III) or (B)(III) but for subparagraph 2902(b)(iii) of the Income Tax Regulations.

• (22) Subsection (1) applies in respect of expenses renounced under a flow-through share agreement entered into after November 4, 2025.

• (23) Subsections (2), (4), (5), (8), (9) and (15) to (21) apply in respect of property acquired on or after December 16, 2024 and, in the case of lease costs, to expenditures incurred on or after December 16, 2024.

• (24) Subsection (3) is deemed to have come into force on April 16, 2024.

• (25) Subsections (6) and (7) apply in respect of expenses renounced under a flow-through share agreement entered into after March 2025.

• (26) Subsections (10) to (14) apply to taxation years that begin on or after December 16, 2024.