Federal Budget 2026 for business owners and corporations

What does Budget 2026 change for business owners?

What changes for my business, before and after, with examples?

Each card shows the rule today, what changes, a simple example in round numbers, what it means for you, when it applies and its status. The examples use the 11% combined small business rate that applies in both BC and Alberta. Jump to the group that fits you:

Law passed by Parliament. Proposed in the budget or in draft legislation, not law yet. Consultation an intention, no draft law yet. Examples are simplified and rounded, and they aren't advice for your situation.

Incorporated owners

RMTs and clinics

Farmers

Passing the farm to a niece or nephew: the farm rollover card in our individuals guide has the example.

Employers and payroll

Cross-border

What is the Productivity Mega Deduction?

It is immediate expensing: a business could deduct 100% of the cost of most new capital property in the year the property becomes available for use, instead of claiming capital cost allowance over many years. Finance Canada announced it on 15 September 2026 with draft legislation, and Budget 2026 confirms the government will proceed with it. It isn't law yet.

• Which property: most depreciable property acquired on or after 15 September 2026, permanently. The budget says it covers more than 65% of business investment.
• Used property: qualifies only if you didn't buy it from a related (non-arm's-length) person and didn't receive it on a tax-deferred rollover.
• Individuals and some partnerships: sole proprietors, trusts and partnerships with individual partners can't use it to create or increase a loss. Corporations can.
• Optional: under the draft rules you can claim less than 100% and leave the rest in the class.
• Development costs: Canadian development expenses incurred from 15 September 2026 would also be deductible at 100%.

Excluded property keeps its existing capital cost allowance, including the Accelerated Investment Incentive. The deduction is a timing benefit: once an asset is fully written off, selling it later can bring the deduction back into income as recapture, and your financial statements may show deferred tax. Our year-end tax planning checklist covers timing purchases around your year-end.

What is the Canada Growth Incentive $15 million exemption?

It is a new capital gains exemption. A Canadian-resident individual could claim up to $15 million of tax-free capital gains on selling qualifying shares of a qualifying corporation, and the limit applies separately to each person for each business.

It is aimed at founders, early employees and investors in growing Canadian companies. The shares must be issued to you by the corporation, for cash or for your work, on or after 5 November 2026 and before 2037. Shares you already own, or buy from another shareholder, don't qualify.

Who can claim it?

• An individual, not a trust, who was at least 18 when the shares were acquired.
• Resident in Canada throughout the year the exemption is claimed.
• Holding the shares directly, or through a partnership they were a member of when it acquired the shares.

Which shares qualify?

Which businesses are excluded?

A qualifying business is an active business other than:

• Consulting and professional practices: consulting services, and the practices of accountants, lawyers, notaries, physicians and other health care practitioners, engineers and architects, plus any business whose main asset is the reputation or skill of its employees.
• Certain sectors: agriculture, fishing, forestry, mining, financial services, insurance, utilities, real estate, food and accommodation, and arts, recreation and entertainment.
• Franchises and licences: any business operating under a licensing or franchising agreement.

That rules out many of the businesses we work with, such as restaurants, rental property companies and incorporated professionals. Technology, manufacturing, and many other product and service businesses may qualify, depending on the facts.

How does it work with the AMT and the lifetime capital gains exemption?

Gains exempted under the Canada Growth Incentive would use a 30% inclusion rate for the Alternative Minimum Tax, the same as gains under the Lifetime Capital Gains Exemption. A large exempt gain can still lead to some AMT.

Claiming the Canada Growth Incentive on shares of a corporation would limit your Lifetime Capital Gains Exemption on shares of the same corporation, and the other way round. The exemption for sales to an Employee Ownership Trust or a worker cooperative can generally be claimed alongside it. Rules to stop people multiplying the $15 million limit, for example through several corporations running the same business, will be released later. Our capital gains tax guide covers the current rules.

What changes for the small business investment rollover?

The rollover lets an individual defer the capital gain on selling eligible small business corporation shares when the proceeds are reinvested in other eligible small business shares. Budget 2026 proposes more time to reinvest: the year of the sale plus the three following calendar years.

• Deferral while you wait: if you haven't reinvested by the end of the year of sale, you could claim a reserve and defer the gain year by year until the replacement period ends.
• Up to five years with a SAFE: if, within the three years, you sign an agreement for future equity (such as a simple agreement for future equity, or SAFE) with an eligible company, you get two more years for the shares to be issued.
• Interest on what isn't reinvested: for proceeds never reinvested, interest at the prescribed rate runs from the balance-due day for the year of sale.
• Easier asset test: while you own the shares, the company's assets need only be used "primarily" in an active business, instead of "all or substantially all". The stricter test still applies when the shares are issued and sold.

These changes would apply to sales on or after 1 January 2027.

What is changing with Part VI.1 tax on preferred share dividends?

Part VI.1 tax is a special tax on dividends paid on taxable preferred shares, the kind of shares often used in estate freezes and family corporations. Budget 2026 proposes two changes:

• CCPCs exempt: dividends paid by a Canadian-controlled private corporation would be excluded from Part VI.1 tax, for dividends paid on or after 5 November 2026.
• Bigger allowance for other corporations: the annual dividend allowance rises from $500,000 to $1.5 million, and the threshold that reduces it from $1 million to $3 million, for tax years ending after 2026.

For most private companies in BC and Alberta, the dividend allowance usually already kept Part VI.1 tax at zero; the change removes a calculation and a filing worry. Finance Canada is also consulting on the wider preferred share rules until 8 January 2027. Our guide to salary or dividends explains how dividends are taxed when you receive them.

Can my corporations share losses after Budget 2026?

Not yet. Budget 2026 announces the government's intention to introduce a corporate loss transfer rule and asks for comments by 8 January 2027. Today, each corporation uses only its own losses, and groups rely on amalgamations, wind-ups or intra-group financing to use a loss elsewhere.

The rule being consulted on is narrow:

• Who: a parent and a subsidiary it wholly owns, directly or indirectly, or two subsidiaries wholly owned by the same parent. Both must be Canadian-resident and taxable.
• What: only current-year non-capital losses, by an annual joint election. The receiving corporation must use the amount that year; it can't carry it back or forward.
• Where: each corporation must have a permanent establishment in only one province or territory, and the same one, to protect provincial tax bases.

The one-province condition matters here: a group with an Alberta subsidiary and a BC subsidiary, or a company with offices in both provinces, wouldn't qualify as drafted. Comments go to clt-consultation-tpes@fin.gc.ca.

Do corporations still need a certified directors' resolution for elections?

Until the law passes, yes. Budget 2026 proposes removing the requirement to file a certified copy of a directors' resolution, or of an authorization, with certain elections and agreements, for those made on or after royal assent.

The budget gives examples: capital dividend elections, transfers of tax liability on certain taxable dividends, transfers of qualified SR&ED expenditures and allocations of SR&ED salaries. For a typical owner-managed company, the capital dividend election is the one you are most likely to notice. Your corporate records should still show that the directors approved the election.

What changes for non-residents selling taxable Canadian property?

When a non-resident sells taxable Canadian property, such as Canadian real estate or certain shares, the purchaser must withhold part of the price unless the CRA issues a clearance certificate. Budget 2026 proposes two changes for dispositions on or after 1 January 2027.

• Section 85 rollovers: no withholding or remittance on a fully tax-deferred section 85 rollover, if the section 85 election is filed and the purchaser notifies the CRA within 30 days. The anti-avoidance period for later sales would go from three years to five.
• Lower rates for corporate vendors: withholding and remittance would drop from 25% to 15% (capital property) and from 50% to 30% (specified property, such as depreciable property or real estate held as inventory).

What does Budget 2026 do for SR&ED?

It widens what counts. For tax years beginning on or after 5 November 2026, Budget 2026 proposes that SR&ED would also cover:

• Regulatory testing: tests, technological validations and studies needed to get the first regulatory approval or certification to commercialise a product or process, when they relate directly to an eligible SR&ED project.
• Intellectual property protection: the costs of registering and maintaining patents, certificates of supplementary protection, plant breeders' rights and copyrighted software developed in an eligible project. Enforcement and litigation costs don't count, and preparation work counts only if it is done in Canada.

If you later sell IP whose protection costs were claimed, recapture rules would apply. The enhanced 35% credit for small and medium corporations and the 15% general rate stay as they are. Our guide to small business tax credits covers SR&ED basics.

Are the clean technology and clean electricity tax credits extended?

Yes, under the proposal. The Clean Electricity and Clean Technology investment tax credits would cover eligible property that becomes available for use before 2041, instead of before 2035. The Clean Technology credit would drop to 15% in its last year, now 2040 instead of 2034.

The Clean Electricity credit would also cover high-voltage transmission lines within a province, for property acquired on or after 5 November 2026. In BC and Alberta, the line must be built to operate at 500 kilovolts or more. The prevailing wage and apprenticeship requirements still apply for the full rates.

Will my corporation still pay tax instalments?

Only above $7,500, if the change passes. Corporations now pay monthly or quarterly instalments unless their federal tax payable is $3,000 or less for the current or previous year. Budget 2026 proposes raising that to $7,500, indexed to inflation and rounded to the nearest $500, for tax years beginning on or after 1 January 2028.

The budget expects about 185,000 small incorporated businesses to stop paying instalments. For tax years that begin before 2028, the $3,000 threshold still applies.

Sole proprietors get two changes on the personal side: from the 2028 tax year, one instalment by December 31 equal to two-thirds of the year's tax, and from the 2027 tax year, one May 15 date to file and pay the T1 return. Our Budget 2026 guide for individuals covers both.

What changes for payroll in 2027?

CPP contributions go down. The base Canada Pension Plan rate drops from 9.9% to 9.5% on 1 January 2027: 4.75% for the employee and 4.75% for the employer instead of 4.95% each. With the 1% first additional CPP, that is 5.75% each instead of 5.95%. Self-employed people pay both sides. The second additional CPP (CPP2) doesn't change.

This is already law. It was announced in the Spring Economic Update 2026 and passed in June 2026 in the Spring Economic Update 2026 Implementation Act; Budget 2026 only counts the savings. The CRA publishes the 2027 maximum pensionable earnings and contribution maximums each year; they weren't on canada.ca when we checked on 6 November 2026. Budget 2026 also proposes, as an intention, to raise the minimum Employment Insurance benefit for apprentices in full-time training from 14 to 18 weeks, temporarily.

What changes for individual pension plans?

Budget 2026 proposes to bring individual pension plans (IPPs) closer to the rules for RRSPs and TFSAs. An IPP is a defined benefit pension plan with fewer than four members, at least one related to the employer, often set up for an owner-manager.

• Wider definition, from 1 January 2027: a plan whose members are all related to the employer, or don't deal at arm's length with such a member, would count as an IPP even with four or more members.
• Investment rules, from 1 January 2028: the advantage, non-qualified investment and prohibited investment rules would apply. The controlling individual would pay a tax of 50% of the value of a non-qualified or prohibited investment and 100% of an advantage. Transitional rules would apply to investments bought before 2028.
• Surplus limit, from 1 January 2028: if an IPP's assets are more than 200% of its pension liabilities, the plan could have its registration revoked, after a notice of at least 30 days that gives time to take the excess out.

Separately, any registered pension plan revoked after 2026 would pay a 10% special tax and be treated as a retirement compensation arrangement.

What else should business owners know?

• Bigger fixed penalties: most fixed-dollar penalties would rise two or three times to catch up with inflation and then be indexed every five years. Medium corporations (over $10 million to $50 million of taxable capital in Canada, with related companies) would pay three times the base amount and large ones eight times, with new penalties for repeated failures. This applies to tax years ending after 2027. Our CRA penalties guide covers the current penalties.
• Tax debts and credit bureaus: the CRA could report income tax or GST/HST debts over $50,000 to credit bureaus, after written notice and once objection and appeal rights are used up.
• Massage therapy and GST/HST: services of qualifying massage therapists would be exempt from GST/HST for supplies made after 5 November 2026. Exempt means no GST/HST charged and no input tax credits on the related costs.
• Productivity Mega Deduction: announced on 15 September 2026 with draft legislation and confirmed in the budget; the rules and exclusions are above.
• CRA compliance: $116.5 million over four years from 2027-28 for non-filer reviews, trust filer checks and checks on corporate returns before refunds; and a proposed CRA income verification service for mortgage lenders and insurers, starting as a pilot.
• Small business loans: the Canada Small Business Financing Program would move to the Business Development Bank of Canada (BDC), and BDC and Export Development Canada would be consolidated.
• Federal corporations and patents: the government intends to give more authorities access to the federal beneficial ownership registry and to strengthen powers to dissolve corporations used for fraud; changes in patent ownership would have to be registered with the Canadian Intellectual Property Office. BC and Alberta companies keep their provincial transparency registers.
• GST/HST and excise: temporary imports relieved for up to 18 months instead of 12, updated customs codes, a common cannabis excise stamp from 2028, and security for spirits licences.
• Postage (not a tax measure): single stamps would rise to $2.00 in 2027 and then 7% a year; the budget estimates about $9 a year extra for a typical small business.
• Interest limits: the excessive interest and financing expenses rules get wider exceptions for purpose-built rental housing and regulated energy utilities.
• More to come: the budget says a second set of tax simplification measures will be announced in the Spring Economic Update 2027.

What does Budget 2026 mean in BC and Alberta?

The federal changes apply in both provinces, and BC and Alberta corporate income tax is filed on the same T2 return. A few points are specific to the two provinces:

• Loss transfers: as drafted, both corporations need permanent establishments in the same single province, so groups operating in both BC and Alberta would be left out.
• Massage therapists: massage therapy is a regulated health profession in BC, so registered massage therapists there would generally qualify for the GST/HST exemption. In a province that doesn't license massage therapists, the proposal requires qualifications equivalent to those needed to be licensed in another province.
• Clean electricity: intra-provincial transmission in BC and Alberta qualifies at 500 kilovolts and above.
• Provincial rates: Federal Budget 2026 doesn't change BC or Alberta corporate tax rates; our guide to corporate tax rates in BC and Alberta has the current figures.

What should business owners do now?

• Buying equipment? Under the proposed Productivity Mega Deduction, property acquired from 15 September 2026 and available for use by your year-end could be written off in full this year. Check the class before buying a vehicle or a building.
• Payroll: make sure your software uses the lower 2027 CPP rate from the first January pay run.
• Planning to issue shares? If you are starting or growing a company that could qualify, talk to us and your lawyer before issuing shares, so that the conditions for the Canada Growth Incentive can be met from day one.
• Keep paying instalments as the CRA asks. The $7,500 threshold starts with tax years beginning in 2028.
• Keep filing directors' resolutions with elections until the change becomes law.
• Track SR&ED costs for regulatory testing and IP protection separately from now, for tax years beginning on or after 5 November 2026.
• Selling small business shares in 2027? Record the proceeds and every reinvestment date; the longer window depends on it.
• Review it at year-end. Our year-end tax planning checklist is the place to bring the budget changes into your plans.

This guide is general information for businesses in BC and Alberta, checked against the Budget 2026 documents on 6 Nov 2026. Budget measures are proposals until passed into law, and the final rules can differ; it isn't tax, legal or investment advice for your situation.