The November 4, 2025 federal Canadian budget sets the course for the nation’s economic and social trajectory in the coming years, with significant spending and investment measures proposed but operating expenditure cuts projected to generate $60 billion in savings over the next 5 years. Although not a major focus, there are several key tax measures (outlined below) which are proposed as part of the 2025 Budget.

Enhanced Manufacturing & Processing Incentives

Buildings and building additions which are used 90% or more for manufacturing and processing activities currently have an enhanced deduction for depreciation of 10% of original cost (when first available for use) or the remaining pool for future years.  The proposed budget will allow a 100% deduction for such building or addition costs where are acquired on or after November 4, 2025 and are available for use before 2030.

Expanded Scientific Research & Experimental Development (SRED)

Increased access to lucrative SRED tax credits may be available for some businesses, with the expenditure limit increasing to $6 million (previously $3 million).  Expenditures for eligible businesses up to this limit will provide a 35% refundable tax credit.

Eliminating Part IV Tax Deferral

Deferral of Part IV tax through intercorporate dividends between companies with staggered year ends will be eliminated in most circumstances under the proposed changes.  Instead, where the corporation receiving the dividends has Part IV tax owing resulting from a dividend refund of the payer corporation, and the recipient corporation has a later year end than the payer corporation, the Part IV tax will be owing based on the payer corporation’s earlier balance due date.

Trust 21-Year Planning

In order for the deemed capital gains on property to be held by trusts not to be triggered on its 21-year anniversary, the trust may (with certain conditions) distribute such property to its beneficiaries tax-deferred before that anniversary.  Distributions to another trust trigger an anti-avoidance rule preventing a reset or extension of the 21-year anniversary in respect of that property.  New proposals would extend that anti-avoidance rule to distributions of property to corporations which are beneficiaries of the original trust, and are owned by another trust.

Underused Housing Tax (UHT) Cancellation

UHT filings and the tax itself will be eliminated for 2025 under the proposed rule changes.  Prior year UHT filings and tax would still be applicable.

Bare Trust Reporting Delayed Again

The budget announcement confirmed another delay in bare trust reporting.  These reporting requirements have been revised and delayed several times, most recently being delayed another year. Applicable bare trusts will be year ends beginning December 31, 2026 or thereafter, under proposed changes.

While not comprehensive, the proposed tax measures could impact numerous taxpayers should they be passed into law.  With a current minority government, however, additional support beyond the Liberal party members could be needed.  These changes, and many other budget proposals, are still up in the air until such time.