Government confirms non-taxability of Canada Carbon Rebates for Small Businesses

From: Department of Finance Canada

News release

June 30, 2025 - Ottawa, Ontario - Department of Finance Canada

Canada’s new government is bringing down costs and putting more money in Canadians’ pockets.

Today, the Minister of Finance and National Revenue, the Honourable François-Philippe Champagne, issued draft legislation to ensure that all Canada Carbon Rebates for Small Businesses are provided tax-free—securing small businesses the full financial benefit of the rebates. 

Specifically, payments received by corporations in respect of the 2019-20 to 2023-24 fuel charge years would not be included in income for tax purposes, and the final payment to be made under the Canada Carbon Rebate for Small Businesses (i.e., in respect of the 2024-25 fuel charge year) will also be tax-free.

The government will introduce legislation in Parliament to implement these changes in the fall.

Once the legislation receives Royal Assent, the Canada Revenue Agency (CRA) will have the authority to process amended T2 corporation income tax returns for those who have already included the rebate in their taxable income, ensuring the rebate is processed as tax-free (i.e., not included in the taxable income reported in the T2). Further guidance will be provided by the CRA at that time.

The Government also confirms that eligible businesses that filed their 2023 tax return after July 15, 2024, and on or before December 31, 2024, will also be eligible to receive tax-free payments in respect of the 2019-20 to 2023-24 fuel charge years, once the legislation receives Royal Assent. Eligible businesses that file their 2024 income tax return by July 15, 2025, will be eligible to receive a tax-free payment in respect of the 2024-25 fuel charge year.

Finally, with the removal of the fuel charge from law and the winding down of proceeds return mechanisms, the government will no longer proceed with proposed changes announced in the 2024 Fall Economic Statement which would have expanded eligibility for the Canada Carbon Rebate for Small Businesses to cooperative corporations and credit unions, added a minimum payment for smaller businesses, and introduced a phaseout for larger businesses.

Quotes

“With the elimination of the federal fuel charge, we will be making our final Canada Carbon Rebate for Small Businesses payments, and as with those for previous years, they will be tax-free rebates. With the consumer fuel charge gone, we are able to refocus federal carbon pollution pricing standards on ensuring that carbon pricing systems are in place across Canada on a broad range of greenhouse gas emissions from industry. In doing so, we will ensure a system that is fair and effective.”

- The Honourable François-Philippe Champagne, Minister of Finance and National Revenue

Quick facts

  • The federal government removed the consumer fuel charge, effective April 1, 2025, via regulations, and introduced legislation that would formally remove the federal fuel charge from Canadian law. A price on pollution for large emitters will continue to be a pillar of Canada’s plan to build a strong economy and greener future.

  • In provinces where the fuel charge applied, a portion of fuel charge proceeds from the price on pollution is returned to eligible small- and medium-sized businesses via the Canada Carbon Rebate for Small Businesses.

  • The Canada Carbon Rebate for Small Businesses is an automatic, refundable tax credit provided directly to eligible businesses, which is delivering over $2.5 billion in tax-free payments to over 600,000 Canadian businesses by returning fuel charge proceeds from the now-cancelled federal consumer fuel charge for the 2019-20 to 2023-24 fuel charge years. 

  • The Minister of Finance and National Revenue will specify payment rates to return to Canadian businesses the $623.1 million in proceeds for the final 2024-25 fuel charge year once sufficient information is available from the 2024 taxation year. 

  • With the removal of the federal fuel charge effective April 1, 2025, the Canada Carbon Rebate for Small Businesses payment in respect of the 2024-25 fuel charge year will be the final payment to eligible businesses. 

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Contacts

Media may contact:

Audrey Milette
Office of the Minister of Finance and National Revenue
audrey.milette@fin.gc.ca

Media Relations
Department of Finance Canada
mediare@fin.gc.ca
613-369-4000

General enquiries

Phone: 1-833-712-2292
TTY: 613-369-3230
E-mail: financepublic-financepublique@fin.gc.ca

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