What's new

We list the service enhancements and major changes below, including announced income tax changes that were not law when this guide was published. If they become law as proposed, they will be effective for 2022 or as of the dates given.

Carbon capture, utilization, and storage (CCUS)

Investment tax credit for carbon capture, utilization, and storage

CCUS is a suite of technologies that capture carbon dioxide (CO2) emissions from fuel combustion, industrial processes, or directly from the air, to either store the CO2 or use it in industry. A new CCUS refundable tax credit is proposed for businesses that incur eligible expenses after 2021 and before 2041.

CCA for CCUS

Four new classes of depreciable property are proposed.

Class 57 would have an 8% declining balance rate. It would apply to expenses incurred for certain property that is part of a CCUS project (including monitoring or control equipment) and that is to be used solely for capturing CO2, for transporting captured carbon, or for storing captured carbon in a geological formation.

Class 58 would have a 20% declining balance rate. It would apply to expenses incurred for certain property that is part of a CCUS project, such as equipment that is used solely for using CO2 in industrial production (including monitoring and control equipment).

Class 59 would have a 100% rate and apply to expenses incurred after 2021 for determining the existence, location, extent, or quality of a geological formation to permanently store captured carbon in Canada (excluding enhanced oil recovery). This includes expenses for environmental studies or community consultations.

Class 60 would have a 30% declining balance rate and generally apply only to expenses incurred after 2021 in drilling, converting, or completing a well in Canada for the permanent storage of captured carbon (excluding enhanced oil recovery), and various other related expenses.

COVID-19 support programs

For information on support programs related to COVID-19, go to COVID-19: Financial support for people, businesses and organizations.

Capital cost allowance (CCA) for clean energy equipment

CCA classes 43.1 and 43.2 are expanded to include air-source heat pumps primarily used for space and water heating. This applies to property that is acquired and that becomes available for use after April 6, 2022. See CCA for clean energy equipment (classes 43.1 and 43.2).

Flow-through shares for oil, gas and coal activities

The flow-through share regime is being eliminated for oil, gas, and coal activities, effective for expenditures under flow-through share agreements entered into after March 31, 2023. See Flow-through shares.

Critical mineral exploration tax credit

The critical mineral exploration tax credit (CMETC) is a new 30% investment tax credit for the exploration of specified minerals. Eligible expenditures renounced under eligible flow-through share agreements that are entered into after April 7, 2022, and before April 1, 2027, will benefit from either the CMETC or the mineral exploration tax credit. See Box 239 - Critical mineral exploration tax credit (CMETC).

Mandatory disclosure rules

Under proposed changes, the existing reportable transaction rules will be strengthened and new requirements will be introduced to report notifiable transactions including related penalties for each failure to meet these reporting requirements. These proposed changes were to apply to transactions entered into after 2022. However, the federal government has announced that it intends to delay the coming into force date until the date on which a bill implementing these changes receives Royal Assent. For the existing reportable transaction rules, see Information reporting of tax avoidance transactions.

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