Tax treatment of the rebate

On March 26, 2026, the Government of Canada passed legislation that makes the Canada Carbon Rebate for Small Business non-taxable for all fuel charge years.

The CRA is now reviewing the T2 Corporation Income Tax Returns for businesses that may have included the rebate in their taxable income for the year it was received.

• If your corporation filed before the announcement on June 30, 2025, in which the government committed to making the rebate tax-free, and:
  • There is clear indication the rebate amount was reported at line 295 of the Schedule 1, we will complete an adjustment to remove the amount from the calculation of your taxable income. No action will be required on your part.
  • There is no clear indication the rebate was included in taxable income, we will be requesting additional information in order to determine if an adjustment to your T2 return is needed.
• If your corporation filed after June 30, 2025, and included the rebate in your taxable income:
  • You will need to submit an adjustment request: Requesting a reassessment of your T2 return

Refer to the flowchart below for a visual depiction of this process.