Finance Canada Releases Draft Legislation January 29

Evelyn Jacks

February 27, 2026 is the last date to comment on a raft of draft legislation released at the end of January covering provisions from the November 4, 2025 Federal budget,  the Fall 2024 Economic Statement, amendments from Budget 2021 regarding Hybrid Mismatching Arrangements, technical changes to two investment tax credits, dating back to 2022 and 2023, as well as corporate changes regarding the Global Minimum Tax.  The key measures to note appear below:

Backdrop.  While retroactive tax legislation dating back several years erodes certainty in tax law and therefore the ability to comply, nonetheless the burden of proof is on the taxpayer.  Further, under the General Anti Avoidance Rules (GAAR), it is up to the taxpayer and their advisors to understand the object, spirit and intent of the law, regardless of whether it is introduced retroactively.   Finally CRA will typically only administer provision for which draft legislation is tabled. 

For all of these reasons the release of this package of draft legislation is important as is commentary from professional advisors who have clients affected by them.

The federal government noted their objectives, despite the late release:  “The proposed changes aim to clarify and improve tax rules, close gaps to prevent tax avoidance, and ensure existing measures work as intended. . .These measures also support broader economic objectives, including investment, productivity, and clean growth, while making the tax system easier to administer and understand.”

The preamble to the invitation to comment however, was also pointed:   “The government invites stakeholders to provide feedback to ensure the legislation is effective, fair, and aligned with its policy objectives.”

November 4, Budget 2025 Measures.  The proposed amendments introduced provide clarity to the changes to qualified investments for registered pension plans, and expand the anti-avoidance rules to ensure both direct and indirect trust-to-trust transfers are captured. 

In addition, the Canada Carbon Rebate payments, which have been wound down, are addressed to ensure that no payments or payments due to adjustments in tax return filings will be made for returns or adjustments received after October 30, 2026.

Important from a CRA administration viewpoint, the draft legislation for the Productivity Super-Deduction provides for the immediate expensing for manufacturing or processing buildings acquire on or after Budget Day and used for those purposes before 2030.  A four year phase-out follows.  This information was covered in the recent CE Summit update.

Changes under the Canadian Exploration Expenses and income derived from a foreign affiliate of a Canadian insurance company that supports Canadian insurance risks were also included.

2024 Fall Economic Statement Measures.  Proposed changes regarding non-profit organizations’ reporting requirements, and the expansion of the Clean Hydrogen investment tax credit were included.

Existing measures.  Under this category of changes presented in the January 29 news release, there were further the technical changes to the Clean Hydrogen investment tax credit,  effective March 28, 2023, and the Carbon Capture, Utilization, and Storage investment tax credit (CCUS tax credit) which are to apply as of January 1, 2022.

Finally, changes first introduced in the summer of 2025 to the Global Minimum Tax Act introduced a “de-consolidation” rule and address tax avoidance issues. 

Issues of concern to NPOs and Corporate Dividend recipients.  Finance Canada is intended to proceed with expanded reporting requirements for NPOs.  This will be of concern for smaller Non Profit Organizations starting in a year from now – on or after January 1, 2027.  Be prepared to provide regular tax filings if receipts are over $50,000.

In addition, new rule will suspend dividend refunds that would normally be received on dividends paid to affiliated corporations.  Tim Cestnick did a great job of explaining the nuances at the Acuity Conference for Distinguished Advisors in November It will be key to synchronize year ends even if corporations have bona fide reasons to have different year ends.  This is an emerging issue we’ll discuss in greater detail throughout 2026 at the CE Summits, always keeping you informed, as we know more. 

Bottom line:  While many of this issues are beyond the scope of the smaller tax accounting and financial advisory practices, there may be some that  affect your clients and/or require further consultation.  Be sure to comment here consultation-legislation@fin.gc.ca by February 27, 2026.