Category: Domestic Tax

Executive summary

Budget 2024 proposed an increase in the capital gains inclusion rate (CGIR) from 1/2 to 2/3. However, with the recent deferral to January 1, 2026, coupled with the slow-moving legislative process and upcoming federal elections, taxpayers face significant uncertainty. This makes proactive tax planning more essential than ever.

In response to this uncertainty, the Canada Revenue Agency (CRA) has provided updates and relief measures for taxpayers, including maintaining specific reporting periods for capital gains, waiving late-filing penalties and interest until mid-2025, and extending deadlines for filing information returns.

Taxpayers should explore various strategies to navigate these changes, such as realizing gains early, leveraging exemptions, and adjusting investment strategies to optimize their tax position. Staying informed and adaptable is crucial as legislative developments unfold.

Navigating capital gains: Compliance updates and tax planning strategies

The proposed changes to the capital gains inclusion rate (CGIR) continue to create uncertainty for taxpayers and businesses alike. While the Department of Finance (DOF) has deferred the implementation of increased CGIR from 1/2 to 2/3 to Jan. 1, 2026, no further legislative updates have been introduced, leaving taxpayers in a position of ambiguity.

Current state of affairs

Since its announcement in the 2024 federal budget, the implementation of increased CGIR has been moving at a slow pace, leading to speculation about whether the increase will be implemented as planned or postponed further. With Parliament set to resume soon, there is still no guarantee that clarity will come swiftly. Given the upcoming federal elections and potential shifts in government policy, it is possible that there will be no definitive answer for several months. In this evolving landscape, taxpayers must stay proactive in their planning, assessing potential outcomes and considering various strategies to mitigate risks and optimize their tax positions.

Recent CRA announcements and compliance updates for 2024 tax returns

The Canada Revenue Agency (CRA) has recently provided clarifications and relief measures for taxpayers and tax preparers dealing with the ongoing uncertainty surrounding capital gains and other compliance requirements:

Reporting capital gains (losses) on returns

The CRA is maintaining Period 1 (pre-June 25, 2024) and Period 2 (on or after June 25, 2024) reporting on T1 and T3 schedules to align with tax slips already issued or filed, despite reverting to the current CGIR of 1/2.

The updated Schedule 3 for 2024 T1 tax returns maintains a breakdown of dispositions into pre- and post-June 25, 2024, periods to align with tax slip disclosures. Therefore, while issuing the tax slips, the taxpayers must still bifurcate the capital gains into both periods and hence, must be reported accordingly on the T1 and T3 income tax returns. This bifurcation is important from a lifetime capital gains exemption (LCGE) perspective, as only dispositions on or after June 25, 2024, are eligible for the enhanced LCGE of $1,250,000 (up from $1,016,836).

Furthermore, the CRA clarified that taxpayers should not use lines 12701 and 25999, even though they remain on the return, as the 1/2 CGIR applies for all of 2024.

Reporting employee stock options deductions

To mirror the increased CGIR, the government also proposed reducing the employee stock options plan (ESOP) deduction from 1/2 to 1/3. However, with the deferral in the implementation of increased CGIR, the CRA clarified that if the taxpayer’s T4 slip includes amounts in boxes 91 and 92 for ESOP deductions after June 24, 2024, at a 1/3 rate, they will need to enter the amounts from the T4 slip on line 24900 of the T1 return. In addition, taxpayers must claim the additional ESOP deduction on line 24901 in order to claim a total deduction of up to 1/2 of the ESOP benefits received in the year. Taxpayers can use the Federal Worksheet to calculate the additional ESOP deduction.

Capital gains penalty and interest relief

The CRA has clarified that late-filing penalties and arrears interest will be waived until June 2, 2025, for impacted T1 individual filers and until May 1, 2025, for impacted T3 trust filers. In addition, the CRA also clarified that this relief applies to both the filing of T3 slips and the T3 income tax return.

Importantly, however, the CRA has revoked relief for corporations with a filing due date on or before March 3, 2025, that was previously announced. The current CRA website for corporate income tax returns no longer mentions corporations being eligible for the relief when compared to an archived version of the website from January 31, 2025.

Relief on filing information returns

The CRA announced that late-filing penalties for information returns (due February 28, 2025) will be waived if filed by March 7, 2025. For T4PS and T5008 slips, the relief has been extended to March 17, 2025, to allow taxpayers additional time to recalculate the amounts due to the deferred implementation of increased CGIR. However, Revenue Quebec has not announced any such relief yet.

In addition, CRA clarified that in case an information return is filed after the extended due date, it will incur a late filing penalty based on its original due date and not the extended due date. Therefore, taxpayers should make all efforts to ensure the information return is filed by the extended due date.

Planning opportunities amid uncertainty

Given the uncertainty surrounding the CGIR, taxpayers who defer planning in anticipation of a final conclusion may find themselves in a disadvantageous position. If the government ultimately moves forward with the proposed increase, those who did not act proactively may face higher tax liabilities than if they had engaged in early planning. Therefore, taxpayers should assess their financial situations and engage in proactive tax planning to optimize their tax positions. Some key considerations are listed below:

Realization of capital gains

The deferral provides additional time for taxpayers to reconsider their tax planning strategies. Taxpayers can use this period to review their investment portfolio to identify any assets with significant unrealized capital gain and decide whether it makes sense to realize gains before the new rate takes effect on January 1, 2026. This could help taxpayers to take advantage of the current lower CGIR. However, this strategy should be weighed against individual circumstances, market conditions and potential future legislative changes.

Utilizing the exemptions

While the implementation of increased CGIR has been deferred, various exemptions such as the principal residence exemption (PRE), the enhanced LCGE and the Canadian entrepreneurs’ incentive (CEI) are intact. Therefore, the taxpayers can access these exemptions to mitigate the taxes. The proposed increase in the LCGE to $1.25 million for qualified small business corporation shares and farming and fishing property provides a valuable tax planning opportunity.  On the other hand, the newly introduced CEI lowers the inclusion rate for certain business owners selling their businesses. Individuals considering the sale of eligible assets should evaluate whether they can take advantage of these exemptions before any further tax policy shifts occur.

Income-splitting

Taxpayers can explore income-splitting strategies with family members in lower tax brackets to distribute capital gains more tax-efficiently. This may involve gifting or selling assets to family members. However, taxpayers need to stay mindful of attribution rules, tax on split income rules and other negative tax considerations that may arise.

Structuring and deferring gains

Taxpayers who are reluctant to realize gains may explore structuring options to defer capital gains or spread them over multiple years. Techniques such as estate freezes, the use of trusts, and corporate reorganizations may help mitigate the tax impact of a future CGIR increase.

Reviewing and adjusting investment strategies

Investors should re-evaluate their portfolios in light of the proposed changes and consider tax-efficient investment options in tax-sheltered accounts such as tax-free savings accounts (TFSAs) and registered retirement savings plans (RRSPs), to minimize taxable gains. Taxpayers must also diversify their investment portfolios to spread risk and potentially reduce the impact of higher CGIR.

Revisiting estate plans

The proposed increase to the CGIR will lead to higher taxes on death arising due to the deemed disposition of assets at fair market value (FMV). Hence, individuals should revisit existing estate plans in light of the higher CGIR to account for the increased tax liability upon death. In addition, taxpayers who have implemented an estate freeze should re-evaluate its effectiveness.

Transfer of assets to individuals

The draft rules provided safe harbour provisions for individuals to protect capital gains below the annual threshold of $250,000 from the higher CGIR. Corporations holding assets (e.g., marketable securities, real estate and/or shares) may consider transferring such assets to their shareholders to crystallize accrued capital gains before the proposed effective date. By doing so, shareholders would be able to shelter future capital gains of up to $250,000 when they eventually sell the assets.

Section 85 rollovers

Taxpayers can crystallize existing accrued capital gains by electing a rollover under section 85 of the Income Tax Act, thereby potentially benefiting from the lower CGIR.

Generally, under subsection 85(1) rollovers, a taxpayer can transfer eligible property to a taxable Canadian corporation where an election is filed. The taxpayer has the option to elect an amount to be deemed as proceeds of disposition for each transferred property. This elected amount may equal or exceed the adjusted cost base (ACB) or undepreciated capital cost (UCC) of the property but must not exceed its FMV.

Since this election is due when the earliest tax return for that particular year is due, taxpayers could elect at the property’s maximum FMV to crystallize the capital gains at a lower rate if the legislation proceeds as planned. Alternatively, taxpayers have the option to elect the transfer to occur at the ACB/UCC of the property, facilitating a fully tax-deferred transfer without triggering capital gains at the time of transfer. This strategy provides the ability and time to the taxpayer to elect a partial or no capital gain depending on where the legislation ends up.

Deferring capital losses carryforward

As the value of net capital losses from previous years will be adjusted to align with the applicable inclusion rate, taxpayers can consider deferring the capital losses carried forward because they will be more valuable when used against the capital gains realized at a higher rate.

Looking ahead: What to expect?

As Parliament resumes and the political landscape unfolds, taxpayers should closely monitor developments. The federal election will play a crucial role in determining the fate of the proposed CGIR increase. A change in government could lead to amendments, delays or even the complete withdrawal of the proposal. Furthermore, global economic conditions, including tariffs, trade tensions, inflation rates, and economic growth in major economies, can influence Canada’s economic stability and policy decisions. Therefore, predicting the final form of the CGIR becomes complex.

Regardless of the outcome, taxpayers must remain adaptable. Waiting until the last minute to make critical tax decisions could result in lost opportunities or higher tax liabilities. The road ahead remains uncertain, but taxpayers can turn ambiguity into opportunity with the right planning.

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This article was written by Daniel Mahne, Chetna Thapar and originally appeared on 2025-02-26. Reprinted with permission from RSM Canada LLP.
© 2024 RSM Canada LLP. All rights reserved. https://rsmcanada.com/insights/tax-alerts/2025/navigating-capital-gains-compliance-updates-tax-planning-strategies.html

RSM Canada LLP is a limited liability partnership that provides public accounting services and is the Canadian member firm of RSM International, a global network of independent assurance, tax and consulting firms. RSM Canada Consulting LP is a limited partnership that provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. The member firms of RSM International collaborate to provide services to global clients but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmcanada.com/about for more information regarding RSM Canada and RSM International.

The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

Executive summary

Canadian taxpayers who have already filed returns based on the proposed increase to the Capital Gains Inclusion Rate (CGIR) should be able to amend their returns after the federal government delayed the increase until 2026. The ongoing political uncertainty in the country means Canadians considering dispositions of capital property in 2026 and beyond should account for the possibility of no increase.

The federal government delayed its proposed increase to the Capital Gains Inclusion Rate (CGIR) to on or after Jan. 1, 2026, after initially applying to dispositions occurring on or after June 25, 2024.

The Canada Revenue Agency (CRA) has announced that:

• It will grant relief from late-filing penalties and interest to impacted individuals and trusts who file by June 2, 2025, and May 1, 2025, respectively.
• Corporations who filed using the increased CGIR will have reassessments issued to adjust the inclusion rate.

Taxpayers can also request amendments to their assessment. All taxpayers should track capital gains and losses according to the new Jan. 1, 2026, effective date to ease compliance.

The CGIR determines the portion of income from the sale of capital property—including shares, land, buildings, and equipment—that is included in a taxpayer’s income.

Initially proposed in last year’s federal budget, the CGIR was set to rise from 50% to 66.67%. Individuals and some types of trusts would continue to be eligible for the one-half inclusion rate on their first $250,000 of net capital gains in a year.

Related amendments

The increased CGIR was accompanied by several related or consequential amendments, such as an increase in the withholding tax rate for dispositions of taxable Canadian property by non-residents.

While the Department of Finance has not yet clarified how most proposed amendments will be impacted, it did state the increase of the Lifetime Capital Gains Exemption from $1,016,836 to $1.25 million will still be effective June 25, 2024, and the Canadian Entrepreneurs’ Incentive will still be introduced as of the 2025 taxation year. Neither of these amendments are currently law.

Political uncertainty complicates increase’s future

Canada’s ongoing political uncertainty in the wake of Trudeau’s resignation left proposed legislation like the increased CGIR unresolved.

A new Liberal leader, who would become prime minister, is expected to be announced on March 9. The future of the increase is not certain under a new Liberal prime minister—and, should an early election be triggered and a new party takes over, a new administration may have its own vision for the CGIR.

In the interim, those considering dispositions of capital property which will occur in 2026 onward should account for the possibility of no increased CGIR.

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This article was written by Cassandra Knapman and originally appeared on 2025-01-31. Reprinted with permission from RSM Canada LLP.
© 2024 RSM Canada LLP. All rights reserved. https://rsmcanada.com/insights/tax-alerts/2025/canada-delays-capital-gains-tax-increase-to-2026.html

RSM Canada LLP is a limited liability partnership that provides public accounting services and is the Canadian member firm of RSM International, a global network of independent assurance, tax and consulting firms. RSM Canada Consulting LP is a limited partnership that provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. The member firms of RSM International collaborate to provide services to global clients but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmcanada.com/about for more information regarding RSM Canada and RSM International.

The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

Executive summary:

Recent revisions introduced in the Federal Budget 2024, particularly the increase in the capital gains inclusion rate (CGIR) from 50% to 66.67%, have introduced new changes to taxpayers utilizing employee stock option plans (ESOP). These changes impact employees by introducing a new deduction framework under paragraphs 110(1)(d.4) and section 38.01, creating potential for significant tax benefits or, in some cases, tax pitfalls. Detailed scenarios below illustrate how the new rules interact to affect the taxation of ESOPs and capital gains. Despite the increased complexity of the revised framework, taxpayers can take advantage of these changes through proactive and strategic tax planning.

Employee stock option plans (ESOPs) are widely regarded as an effective tool for remunerating and incentivizing employees, particularly in fostering long-term alignment with corporate goals. From a tax perspective, ESOPs have historically provided distinct advantages for employees, including the ability to claim deductions on taxable benefits arising from stock option exercises and, in some cases, to defer tax liabilities to a future date.

However, recent changes introduced in the Federal Budget 2024, particularly the increase in the capital gains inclusion rate (CGIR) from 50% to 66.67%, have introduced new complexities and challenges for taxpayers utilizing ESOPs. Of particular concern is the overlap between the deferral of stock option benefits for Canadian-controlled private corporation (CCPC) ESOPs and the realization of capital gains in the same year, which may make it difficult to optimally utilize the $250,000 annual deduction limit, turning what is often seen as a beneficial rule into an unexpected trap. These amendments alter the tax landscape for employees and introduce new considerations for tax planning. For individual taxpayers, the decision to delay certain dispositions or exercises can create possible tax savings or, in some cases, tax pitfalls.

It is important to note, however, that Prime Minister Justin Trudeau announced his resignation, pending selection of a new Liberal Party leader, and requested that Parliament be prorogued until March 24. As a result, it is possible that the proposed amendments discussed below may not be passed.

Taxation of ESOPs: Existing rules and new regime

Under the current rules, when an employee exercises a stock option, the difference between the stock’s Fair Market Value (FMV) and its exercise price (stock option benefit) is included in the employee’s income as a taxable benefit. For employees of CCPCs, taxation of the stock option benefit is deferred until the shares are ultimately disposed of or exchanged. This deferral provides an advantage by allowing employees to delay the income recognition and the associated tax liability.

Historically, the taxation of ESOPs in Canada mirrored the taxation of capital gains, with employees being eligible to claim a stock option deduction equal to 50% of the stock option benefit. This effectively reduced the net income inclusion of the stock option benefit to 50%.

Changes effective June 25, 2024

Effective June 25, 2024, the CGIR has increased from 50% to 66.67%. Additionally, the stock option benefit deduction under paragraphs 110(1)(d) to (d.3) has been reduced from 50% of the taxable benefit to 33.33%, aligning the net stock option benefit with the new CGIR. Individual taxpayers will be able to maintain the 50% CGIR on their first $250,000 of capital gains annually, which must be shared with any stock option benefits for the year. This provision provides an avenue for individual taxpayers to manage their taxable income more efficiently while still adhering to the revised rules.

Introduction of paragraph 110(1)(d.4)

To accommodate the $250,000 annual limit, paragraph 110(1)(d.4) has been proposed. This provision enables an additional deduction equal to 1/6^th of the stock option benefit up to $250,000, provided a deduction is claimed under any of paragraphs 110(1)(d) to (d.3). In effect, this allows taxpayers to claim a cumulative deduction equal to 50% on the first $250,000 of stock option benefit (33.33% under paragraphs 110(1)(d), (d.1), (d.2) or (d.3) and 1/6^th under paragraph 110(1)(d.4)). Additionally, new section 38.01 has been introduced, allowing for a deduction of 1/6^th of the capital gain for the first $250,000 capital gains annually. However, this deduction is ground down by six times the deduction taken under paragraph 110(1)(d.4). These new paragraphs collectively ensure that taxpayers can achieve a reduced CGIR of 50% for the first $250,000 of combined stock option benefits and capital gains.

Example

The following example models how these deductions interact.

A taxpayer has an ESOP with a public corporation that was issued out-of-the-money for 50,000 shares. The taxpayer has $200,000 of other capital gains realized on the disposition of marketable securities. Consider the following three scenarios (all exercises occur on or after June 25, 2024):

• Scenario I: The ESOP has an exercise price of $10. The taxpayer exercised the option while the FMV of the shares was $20. At the time of sale, the FMV of the shares was $25.
• Scenario II: The ESOP has an exercise price of $10. The taxpayer exercised the option while the FMV of the shares was $12. At the time of sale, the FMV of the shares was $18.
• Scenario III: The ESOP has an exercise price of $10. The taxpayer exercised the option while the FMV of the shares was $10.50. At the time of sale, the FMV of the shares was $11.

Particulars		Scenario I	Scenario II	Scenario III
Calculation of employment benefit
FMV on exercise	(A)	$ 20.00	$ 12.00	$ 10.50
Option price	(B)	$ 10.00	$ 10.00	$ 10.00
Stock option benefit per share	(C) = (A) – (B)	$ 10.00	$ 2.00	$ 0.50
No. of shares	(D)	50,000	50,000	50,000
Total option benefit	(E) = (C) x (D)	$ 500,000.00	$ 100,000.00	$ 25,000.00
Stock option deduction under 110(1)(d)(1)	(F) = (E) x 1/3	$ 166,666.67	$ 33,333.33	$ 8,333.33
Taxable employment benefit	(G) = (E) – (F)	$ 333,333.33	$ 66,666.67	$ 16,666.67
Calculation of taxable capital gains
Proceeds of Disposition	(H)	$ 25.00	$ 18.00	$ 11.00
FMV on exercise	(I)	$ 20.00	$ 12.00	$ 10.50
Capital gain per share	(J) = (H) – (I)	$ 5.00	$ 6.00	$ 0.50
No. of shares	(K)	50,000	50,000	50,000
Capital gain on ESOP shares	(L) = (J) x (K)	$ 250,000.00	$ 300,000.00	$ 25,000.00
Unrelated capital gains – assumed	(M)	$ 200,000.00	$ 200,000.00	$ 200,000.00
Total capital gains	(N) = (L) + (M)	$ 450,000.00	$ 500,000.00	$ 225,000.00
Total taxable capital gains	(O) = (N) x 2/3	$ 300,000.00	$ 333,333.33	$ 150,000.00
Calculation of new 110(1)(d.4) deduction
3 x deduction under 110(1)(d) or (d.1)	(P) = (F) x 3	$ 500,000.00	$ 100,000.00	$ 25,000.00
1.5 x Amount deducted under (d.01)	(Q)	$ 0	$ 0	$ 0
Lesser of $250,000 and difference of the above	(R) = Lower of 250k & (P) – (Q)	$ 250,000.00	$ 100,000.00	$ 25,000.00
110(1)(d.4) deduction	(S) = (R) x 1/6	$ 41,666.67	$ 16,666.67	$ 4,166.67
Calculation of CG reduction under 38.01
250,000 – 6 x 110(1)(d.4) deduction	(T) = $250,000 – ((S) x 6)	$ –	$ 150,000.00	$ 225,000.00
1.5 x taxable capital gains	(U) = (O) x 1.5	$ 450,000.00	$ 500,000.00	$ 225,000.00
38.01 deduction – 1/6 times the lesser of the above	(V) = 1/6 ( lower of (T) & (U))	$ –	$ 25,000.00	$ 37,500.00
Total net stock option income inclusion	(W) = (G) – (S)	$ 291,666.67	$ 50,000.00	$ 12,500.00
Total taxable capital gains	(X) = (O) – (V)	$ 300,000.00	$ 308,333.33	$ 112,500.00

Implications for CCPC ESOPs

Notably, the stock option benefit deferral for CCPC ESOPs under subsection 7(1.1) can inadvertently create difficulties in optimally utilizing the $250,000 annual limit. Since the deferral delays the income recognition of the stock option benefit to the year the individual disposes of the shares, both the stock option benefit and the associated capital gain are realized in the same year. This overlap necessitates careful planning, as the combined income inclusions may exceed the $250,000 threshold, reducing the effectiveness of the deductions under paragraph 110(1)(d.4) and section 38.01. In contrast, taxpayers holding shares outside a CCPC ESOP may have more flexibility in timing their stock option exercises and capital gains realizations.

Key takeaway

The introduction of a new deduction framework for ESOPs under the revised capital gains regime reflects an effort to balance the increased CGIR with targeted relief for individual taxpayers. While the changes introduce new complexities, they also present opportunities for strategic tax planning, particularly for taxpayers able to optimize their use of the $250,000 annual limit.

By understanding the nuances of paragraphs 110(1)(d.4) and section 38.01, and leveraging these provisions effectively, taxpayers can navigate the revised rules while minimizing their overall tax liability. As the tax landscape continues to evolve, proactive planning and adherence to best practices will be key to ensuring compliance and maximizing benefits under the new regime.

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This article was written by Chetna Thapar, Daniel Mahne and originally appeared on 2025-01-21. Reprinted with permission from RSM Canada LLP.
© 2024 RSM Canada LLP. All rights reserved. https://rsmcanada.com/insights/tax-alerts/2025/navigating-the-new-esops-deduction-under-the-revised-capital-gains-regime.html

RSM Canada LLP is a limited liability partnership that provides public accounting services and is the Canadian member firm of RSM International, a global network of independent assurance, tax and consulting firms. RSM Canada Consulting LP is a limited partnership that provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. The member firms of RSM International collaborate to provide services to global clients but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmcanada.com/about for more information regarding RSM Canada and RSM International.

The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

Executive summary

Simplify your tax filing process with the compiled key deadlines for middle-market taxpayers. This article is your solution for tracking important tax dates. Timely filing and payment can help you avoid delays in refunds, benefits, or credits, and can prevent late filing or payment penalties and interest.

With the approaching tax season, a taxpayer may have to file numerous returns and forms to ensure tax compliance. In addition, keeping track of the annual tax filing and payment deadlines is increasingly difficult with the changing tax and political landscape. This article summarizes the key tax filing and payment deadlines for 2025 for middle-market taxpayers.

Where the taxpayer omits filing and payment, late files and remits, additional penalties and/or interest may start to accrue, adding an additional cost burden on the taxpayer.

Return/ Form Type	Taxpayer Type	Due date of filing or payment
T1 Returns	Self-employed individuals or those whose spouses or common-law partners are self-employed	Return due on June 15, 2025* Tax owing due on April 30, 2025
	Other individuals	Return due on April 30, 2025 Tax owing due on April 30, 2025
	Deceased individuals where the date of death is before November 1, 2024	Return due on: For self-employed individuals: June 15, 2025* For others: April 30, 2025 Tax owing due on April 30, 2025
	Deceased individuals where the date of death is on or after November 1, 2024	Return due six months after the date of death Tax owing due six months after the date of death
	Non-resident individuals with a Canadian filing obligation (Section 216/217 returns)	Return due on June 30, 2025 Tax owing in excess of withheld amounts due on April 30, 2025
T2 Corporate Tax returns	For corporations having a December 31, 2024, calendar year-end	Return due on June 30, 2025 Tax owing due: For CCPCs claiming Small business deduction (SBD) with taxable income (including all associated corporations) less than the small business limit: 3 months after year-end For all other corporations: 2 months after year-end
	For corporations having a non-calendar year-end	Return due no later than six months after the end of the corporation’s taxation year Tax owing due: For CCPCs claiming SBD with taxable income (including all associated corporations) less than the small business limit: 3 months after year-end For other corporations: 2 months after year-end
T3 Trust returns	Inter-vivos trusts (required to have a calendar year-end)	Return due 90 days after the trust’s year-end on March 31, 2025
	Testamentary trusts and Non-resident trusts with a filing obligation in Canada (not required to have a calendar year-end)	Return due no later than 90 days after the trust’s year-end date
T4, T4A-NR, T5	–	Due on Feb 28, 2025
NR4 Non-Resident information returns	For an estate or trust	Return due 90 days after the trust’s year-end on March 31, 2025
	Other taxpayers	Return due on March 31, 2025
T5013 Partnership returns	Where partners are either individuals, trusts, professional corporations or a combination thereof; and Partnerships that are tax shelters	Return due on March 31, 2025
	Where partners are corporate partners (not including professional corporations)	Return due five months after the end of the taxation year of the partnership
	All other cases	Earlier of: March 31 after the calendar year in which the fiscal period of the partnership ended; The day that is five months after the end of the partnership’s fiscal period
T1134 Information return relating to foreign affiliates	For individuals and other taxpayers having December 31, 2024 as year-end	Return due on October 31, 2025
	For other taxpayers with a taxation year beginning in 2024	Return due no later than 10 months after the year-end
T1135 Foreign income verification statement	Self-employed individuals or those whose spouses or common-law partners are self-employed	Return due on June 15, 2025*
	Other individuals	Return due on April 30, 2025
	For corporations having a December 31, 2024 calendar year-end	Return due on June 30, 2025
	For corporations with a non-calendar year-end	Return due no later than six months after the end of the corporation’s taxation year
	Partnerships where partners are either individuals, trusts, professional corporations, or a combination thereof; and Partnerships that are tax shelters	Return due on March 31, 2025
	Partnerships where partners are corporate partners (not including professional corporations)	Return due five months after the end of the taxation year of the partnership
	All other partnerships	Earlier of: March 31 after the calendar year in which the fiscal period of the partnership ended; The day that is five months after the end of the partnership’s fiscal period
	Inter-vivos trusts with December 31, 2024 year-end	Return due on or before March 31, 2025
	Testamentary trusts	Return due no later than 90 days after the trust’s year-end date
T106 Information return of non-arm’s length transactions with non-residents	Self-employed individuals or those whose spouses or common-law partners are self-employed	Return due on June 15, 2025*
	Other individuals	Return due on April 30, 2025
	For corporations having a December 31, 2024, calendar year-end	Return due on June 30, 2025
	For other corporations	Return due no later than six months after the end of the corporation’s taxation year
	Partnerships where partners are either individuals, trusts, professional corporations or a combination thereof; and Partnerships that are tax shelters	Return due on March 31, 2025
	Partnerships where partners are corporate partners (not including professional corporations)	Return due five months after the end of the taxation year of the partnership
	All other partnerships	Earlier of: March 31 after the calendar year in which the fiscal period of the partnership ended; The day that is five months after the end of the partnership’s fiscal period
	Inter-vivos trusts with December 31, 2024, year-end	Return due on or before March 31, 2025
	Testamentary trusts and Non-resident trusts with a filing obligation in Canada	Return due no later than 90 days after the trust’s year-end date
UHT-2900 Underused Housing Tax Return and Election form	Certain taxpayers owning a residential property in Canada	Return for 2024 calendar year due on April 30, 2025 Tax owing due on April 30, 2025
Form T661 Scientific research and experimental development (SR&ED)	Self-employed individuals	Form due no later than 12 months after the filing due date of T1
	Corporations (except for non-profit SR&ED corporations)	Form due no later than 12 months after the filing due date of T2 or 18 months from the end of the taxation year
	Non-profit SR&ED corporations	Form due no later than six months after the end of the corporation’s taxation year
	Partnerships	Form due no later than 12 months after the earliest of all filing due dates for each member’s income tax return deadline for the tax year in which the partnership’s fiscal period ends.
	Trusts	Form due no later than 12 months after the filing due date of T3
RC312 Reportable Transaction and Notifiable Transaction Information return	Every person or entity for whom a tax benefit results from the reportable transactions or the person who enters into the reportable transaction on behalf of that person	Information return due 90 days from the earlier of: When the transaction is entered into; When the person is contractually obligated to enter the transaction
RC313 Reportable uncertain tax treatment (RUTT) Information return	For corporations having December 31, 2024, year-end that are required to disclose RUTT	Information return due no later than June 30, 2025
	For corporations with a non-calendar year-end that are required to disclose RUTT	Information return due no later than six months after the end of the taxation year
Schedule 130 (or information to be contained therein) for entities having interest and financing expenses or interest and financing revenues under EIFEL	For corporations having December 31, 2024, year-end	Information return due on June 30, 2025
	For corporations with non-calendar year-end	Information return due within 6 months after the end of the corporation’s taxation year
	Trusts	Information return due within 90 days after the trust’s tax year-end.
	Partnerships where partners are either trusts, professional corporations or a combination thereof including tax-shelter partnerships	Information return due on March 31, 2025
	Partnerships where partners are corporate partners (not including professional corporations)	Information return due five months after the after the end of the partnership’s fiscal period
	All other partnerships	Earlier of: March 31 after the calendar year in which the fiscal period of the partnership ended; The day that is five months after the end of the partnership’s fiscal period
Digital Services Tax	Foreign or domestic businesses that meet the filing requirement for any one of the 2022, 2023, or 2024 calendar years	Return due on June 30, 2025
GloBE Information return (GIR) for Global Minimum Tax (GMT)	If the Ultimate parent entity (UPE) or designated filing entity files GIR outside Canada and that jurisdiction has a qualifying competent authority agreement with Canada	Return is not required to be filed in Canada. Each Canadian entity of the multinational enterprise (MNE) group must notify the CRA of the identity and jurisdiction of the filing entity.
	If the UPE or designated entity is located in Canada or there is no qualifying competent authority agreement with the relevant foreign jurisdiction	If it is the first year in which the MNE group is subject to GMT: Return must be filed within 18 months from the end of the taxation year For other years: Return must be filed within 15 months from the end of the taxation year

* As per the Canada Revenue Agency (CRA) guidance, when a due date falls on a Saturday, Sunday, or public holiday recognized by the CRA, the return is considered filed and the payment is considered to be made on time if the CRA receives the filing, or if the payment or filing is postmarked, on or before the next business day. Therefore, in these instances, as the due date falls on a weekend or a federal holiday, the filing or payment deadline is the first working day following.

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This article was written by Chetna Thapar, Farryn Cohn and originally appeared on 2025-01-21. Reprinted with permission from RSM Canada LLP.
© 2024 RSM Canada LLP. All rights reserved. https://rsmcanada.com/insights/tax-alerts/2025/2025-tax-filing-payment-dates-canadian-middle-market-taxpayers.html

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The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

An August 20, 2024, Tax Court of Canada case reviewed whether a corporation could claim ITCs of $8,874 related to the purchase of two vehicles that were used by the corporation. One vehicle was purchased by the shareholder and the other was purchased by the shareholder and his spouse.

Taxpayer loses

To be eligible for an ITC, the corporation must meet all of the following conditions:

1. the corporation must have acquired the vehicles;
2. the GST/HST in respect of the vehicles must be payable or must have been paid by the corporation; and
3. the vehicles must have been acquired in the course of the corporation’s commercial activities.

The Court found no evidence that the corporation acquired either vehicle; the corporation’s name was not on the sales agreements, bill of sales, vehicle registrations, or proof of insurance. In addition, there was no evidence of any trust, agency or assignment agreement. As such, criterion (a) was not met.

The Court also found that the corporation was not liable to pay consideration under the purchase agreement for either vehicle; therefore, GST/HST was not payable by the corporation. As such, criterion (b) was not met.

While the corporation argued that the vehicles were used or available for use by the corporation, the vehicles were not actually acquired in the course of the corporation’s commercial activities. As such, criterion (c) was not met.

While only failing one of the above criteria would be fatal to the claim, the corporation failed all three. The ITC was appropriately denied.

Care should be afforded to acquire assets in the proper entity such that GST/HST can be recovered as an input tax credit, if appropriate.

A March 30, 2023, Tax Court of Canada case reiterated the importance of the trustee of a trust properly understanding the terms of the trust. In this case, the trust had paid $100,000 to two beneficiaries, both under age 18, from capital gains eligible for the capital gains exemption. However, the terms of the trust prohibited payments to beneficiaries under age 18.

Taxpayer loses

The Court ruled that amounts paid in violation of the trust terms were not payable for income tax purposes and were therefore neither income to the beneficiaries nor deductible from the trust’s income

If acting as a trustee of a trust, ensure to fully understand the terms of the trust to avoid a surprising tax consequence.