Canada’s latest federal budget (Budget 2025), which was presented on Nov. 4, 2025, includes measures for industries to drive economic growth and self-sustainability.
Here is a breakdown of the key takeaways by industry and how they could affect you and your business.
Leaders in Canada’s business and professional services sectors should pay close attention to Budget 2025’s proposals—especially taxpayers that have a foreign presence, use trusts in their corporate holding structures and engage in cross-border transactions with affiliates.
Firms engaging in intercompany transactions should revisit their transfer pricing policies to ensure both the form and substance of an arm’s length approach are reflected.
For trust structures holding capital properties, taxpayers should account for the application of the 21-year rule that will force a recognition of accrued gains.
Where complex transactions are enacted, particularly those with cross-border elements, taxpayers should expect heightened scrutiny from the Canada Revenue Agency (CRA).
How RSM Canada can help you with business services and professional services >
Budget 2025 proposed amendments to Canada’s transfer pricing framework to better align domestic rules with guidelines set by the Organisation for Economic Co-operation and Development (OECD) and in line with the internationally agreed upon arm’s length principle.
The proposed measures will apply to taxation years beginning after Nov. 4, 2025, so firms with an international presence should revisit their transfer pricing policies promptly. Professional service firms that engage in cross-border agreements—including sub-contracting consulting services to affiliates—should consider updating their existing transfer pricing policies to be aligned with a substance-over-form approach that considers factors outside the legal nature of a transaction.
The proposed changes would introduce a new interpretative framework where transactions would be assessed beyond their legal form to account for their actual conditions and economically relevant characteristics.
The current transfer pricing framework asks whether a transaction or series would have been entered between theoretical persons dealing at arm’s length. In contrast, the proposed amendments test the conditions that would have applied had the participants of a transaction dealt at arm’s length in comparable circumstances. This includes the possibility that the transaction or series be replaced with an alternative transaction or series—or no transaction or series at all.
The proposals include an increase to the transfer pricing adjustment penalty threshold from $5 million to $10 million—after which, a 10 per cent penalty will apply—and an amendment to the existing contemporaneous documentation rules to account for economic circumstances and actual conduct of the parties.
Simplification measures for the contemporaneous documentation requirement are also part of this new framework, but the conditions will be prescribed by regulation at a future date. Instead of three months, taxpayers will only have 30 days from a request to provide contemporaneous documentation.
Budget 2025 proposed broadening the 21-year deemed disposition rule for trusts. Firms that use trust structures to hold shares should plan for the application of this rule, particularly to minimize cash-flow issues that may result from trusts recognizing accrued gains.
Generally, personal trusts are considered to dispose of certain capital property at fair-market value on their 21st anniversary, which prevents the indefinite deferral of accrued gains.
Taxpayers may have previously engaged in transactions to avoid the application of the 21-year rule, including by distributing trust property on a tax-deferred basis to a corporate beneficiary owned by a new trust.
The new proposal would extend the scope of an anti-avoidance provision to capture indirect transfers of trust property to other trusts. This planning was previously designated as a notifiable transaction to the CRA under Canada’s mandatory disclosure rules.
Beyond amendments to the 21-year rule, the federal government plans to defer bare trust reporting by an additional year, with proposed reporting requirements now taking effect for taxation years ending on or after Dec. 31, 2026. Corporate groups that use entities as agents to hold legal titles to property in their corporate structure will have additional time to change holding structures or plan for filing.
Budget 2025 proposed that the CRA will leverage artificial intelligence (AI) and process automation to strengthen compliance and collections. This should allow CRA personnel to focus on complex corporate and cross-border tax matters.
The federal government also anticipates that additional resources will be available at the CRA from winding down internal programs tied to eliminated tax frameworks like the federal fuel charge, digital services tax and the Canadian carbon rebate.
Professional services businesses that engage in complex transactions, including those with an international component, may expect heightened scrutiny and audit activity from the CRA.
Budget 2025 featured proposals that focused on boosting Canada’s domestic resilience and enhancing competitiveness for the country’s consumer products industries.
It emphasized stronger enforcement, trade and supply chain investments, sustainability rules and a new, domestically targeted policy to boost local industries and jobs.
Further measures such as anti-greenwashing regulations and supply chain protections aim to enhance local production, ensure transparency and reduce reliance on foreign trade partners while supporting sustainable growth and job creation.
The federal government will invest $77 million over four years, plus $19.2 million in ongoing funding, to help the CRA deal with the misclassification of truckers as independent contractors.
This initiative includes ending the pause on reporting service fees in the trucking industry and improving data sharing with Employment and Social Development Canada.
Budget 2025 proposed eliminating the luxury tax on eligible aircraft and vessels. This change, effective Nov. 4, 2025, would apply to all sales, imports, leases and improvements.
Registered vendors must file a final return and can claim eligible rebates until Feb. 1, 2028, when registrations will be cancelled automatically.
To address GST/HST carousel fraud, Budget 2025 proposed a new reverse charge mechanism (RCM) for specified telecommunication services. It would shift tax collection responsibility to registered recipients who will self-assess and claim input tax credits.
Amendments to the Competition Act aim to reduce false or misleading environmental claims. Recognizing confusion under existing rules, Budget 2025 proposed clarifications to support legitimate sustainability efforts while maintaining consumer protection against greenwashing.
To achieve its goal of doubling non-U.S. exports within a decade, the federal government intends to invest in new trade and transportation infrastructure.
The Canada Infrastructure Bank will help assess and fund projects that enhance trade diversification and global connectivity.
Budget 2025 proposed investing over $25 billion to safeguard industries such as auto manufacturing, steel, aluminum, forestry and agriculture from tariffs and trade disruptions. Key initiatives include the $10 billion large enterprise tariff loan facility and a strategic response fund to modernize operations, support workers and enhance supply chain resilience.
The federal government also intends to prioritize domestic suppliers in federal procurement through a new policy; any exceptions would require ministerial approval. This proposed policy, supported by $185 million in funding, aims to boost Canada’s industrial capabilities, increase jobs and enhance social enterprises by including a new small and medium business procurement program to expand local participation.
This year laid bare how exposed Canada’s industrials sector is to trade disruptions, supply chain uncertainties and intensifying global competition.
To address these vulnerabilities, Budget 2025 introduced generational capital investments, expanded tax credits and a broad array of funding, loan and incentive programs for the industrials sector.
The federal government hopes this comprehensive industrial strategy of tax- and non-tax measures can accelerate nation-building infrastructure projects, catalyze private investment, diversify trade and respond to technological developments.
Industrial businesses that make capital investments will benefit from the budget’s proposed productivity super-deduction package of tax measures.
This package includes immediate expensing of a wide range of capital investments, including manufacturing and processing machinery, clean energy equipment and productivity-enhancing assets and enhanced first-year deduction for most capital assets.
Beneficiaries of this package are expected to have the lowest corporate marginal effective tax rate among G7 countries.
Budget 2025 also introduced immediate expensing for qualifying manufacturing and processing buildings acquired on or after Nov. 4, 2025.
Budget 2025 recommended enhancing the following partially implemented clean economy investment tax credits (ITC):
Budget 2025 included a plan to increase the expenditure limit for the scientific research and economic development (SR&ED) credit to $6 million. This measure would join other previously announced changes, including restoring eligibility for capital expenditures.
Administrative reforms were also proposed to improve predictability and streamline the application and approval process.
The proposed critical mineral sovereign fund (CMSF) and first and last mile fund (FLMF) aim to position Canada as a reliable supplier of industrial inputs.
CMSF would use equity investments, loan guarantees and offtake agreements to accelerate projects, while FLMF would move projects from exploration to production faster by closing infrastructure gaps in critical mineral value chains using clean energy and transportation solutions.
Canada’s automotive, steel and aluminum sectors are among the hardest hit by U.S. tariffs. The federal government intends to commit $5 billion over six years to support sectors affected by trade actions—with $1 billion allocated to strengthen steel supply chains through retooling support, market expansion and loan guarantees.
Budget 2025 provided long-term carbon pricing certainty and carbon contracts for difference to reduce risk on major low-carbon projects. These measures would reduce risk on major low-carbon projects in order to encourage investment in cleaner technologies and emissions reductions.
Budget 2025 presented a change in strategy to address housing and affordability with initiatives for developers and buyers alike.
Instead of relying on vacancy taxes like the underused housing tax (UHT), the federal government intends to invest in long-term solutions to stabilize supply and improve housing affordability. This shift is supported by rising home sales, easing interest rates and prices, moderated immigration and increased development activity over the last year.
Supply-side measures and incentives create a more predictable environment for developers and property investors. Businesses should consider leveraging accelerated capital cost allowance (CCA) and GST relief where eligible to support construction projects.
As for prospective buyers, now may be a strategic time to explore homeownership or invest in rental property given improving affordability and the introduction of new support mechanisms.
The proposed elimination of the UHT, starting for the 2025 calendar year, comes as the government moves away from punitive measures and more towards pro-growth, supply-side solutions.
While requirements remain in effect for the 2022 to 2024 calendar years, no filings or payments would be required for 2025 and subsequent years.
To ease entry into the housing market, the government proposed a GST/HST rebate for first-time home buyers on homes priced up to $1 million and a partial rebate for homes priced between $1 million and $1.5 million.
If that draft legislation receives royal assent, new homeowners could save up to $50,000 in GST/HST, making homeownership more attainable.
Budget 2025 reinforced earlier commitments to accelerate housing supply and confirmed compliance changes that could benefit real estate investors and developers. These include:
Beyond tax policy, the government is investing in long-term structural solutions to scale housing supply.
The new Build Canada Homes agency was created in September to double the pace of homebuilding over the next decade by financing construction, streamlining approvals and promoting cost-efficient building methods. It also supports workforce expansion and immigration moderation to ease housing pressure.
Existing mechanisms like the apartment construction loan program and mortgage loan insurance continue to support elevated levels of construction activity, particularly in the rental sector.
Budget 2025 emphasized technology and innovation by proposing enhancements to the SR&ED program and further investments in AI and intellectual property (IP).
Canadian tech businesses can capitalize these opportunities by consulting professional advisors to navigate these proposals and implement them effectively.
Budget 2025 proposed expanding the expenditure limit for the enhanced 35 per cent SR&ED credit from $3 million to $6 million to foster innovation in Canada.
This marks a notable change from the August draft legislation, which suggested an expenditure limit increase to $4.5 million. The additional $1.5 million would increase the amount of expenses eligible for SR&ED credits for small and medium-sized enterprises in particular—at a time where financial support is critical.
Budget 2025 introduced several measures to address the persistent underinvestment of IP by Canadian business due to the significant outlay of costs. These include:
While the performance review could increase compliance burden, the other measures offer both tax and non-tax support to Canadian businesses.
Budget 2025 announced investments in the CRA to enhance its use of AI and automation. These investments would target certain compliance and collection matters to allow the CRA to focus on more complex tax matters.
The CRA also intends to use AI to improve the administration of the SR&ED program, beginning April 1, 2026, by performing risk assessment on these claims and expediting the review process.
Additional proposals include:
Providing funding targeted to the media and art sector to promote Canadian arts and culture initiatives.
Leaders in Canada’s business and professional services sectors should pay close attention to Budget 2025’s proposals—especially taxpayers that have a foreign presence, use trusts in their corporate holding structures and engage in cross-border transactions with affiliates.
Firms engaging in intercompany transactions should revisit their transfer pricing policies to ensure both the form and substance of an arm’s length approach are reflected.
For trust structures holding capital properties, taxpayers should account for the application of the 21-year rule that will force a recognition of accrued gains.
Where complex transactions are enacted, particularly those with cross-border elements, taxpayers should expect heightened scrutiny from the Canada Revenue Agency (CRA).
How RSM Canada can help you with business services and professional services >
Budget 2025 proposed amendments to Canada’s transfer pricing framework to better align domestic rules with guidelines set by the Organisation for Economic Co-operation and Development (OECD) and in line with the internationally agreed upon arm’s length principle.
The proposed measures will apply to taxation years beginning after Nov. 4, 2025, so firms with an international presence should revisit their transfer pricing policies promptly. Professional service firms that engage in cross-border agreements—including sub-contracting consulting services to affiliates—should consider updating their existing transfer pricing policies to be aligned with a substance-over-form approach that considers factors outside the legal nature of a transaction.
The proposed changes would introduce a new interpretative framework where transactions would be assessed beyond their legal form to account for their actual conditions and economically relevant characteristics.
The current transfer pricing framework asks whether a transaction or series would have been entered between theoretical persons dealing at arm’s length. In contrast, the proposed amendments test the conditions that would have applied had the participants of a transaction dealt at arm’s length in comparable circumstances. This includes the possibility that the transaction or series be replaced with an alternative transaction or series—or no transaction or series at all.
The proposals include an increase to the transfer pricing adjustment penalty threshold from $5 million to $10 million—after which, a 10 per cent penalty will apply—and an amendment to the existing contemporaneous documentation rules to account for economic circumstances and actual conduct of the parties.
Simplification measures for the contemporaneous documentation requirement are also part of this new framework, but the conditions will be prescribed by regulation at a future date. Instead of three months, taxpayers will only have 30 days from a request to provide contemporaneous documentation.
Budget 2025 proposed broadening the 21-year deemed disposition rule for trusts. Firms that use trust structures to hold shares should plan for the application of this rule, particularly to minimize cash-flow issues that may result from trusts recognizing accrued gains.
Generally, personal trusts are considered to dispose of certain capital property at fair-market value on their 21st anniversary, which prevents the indefinite deferral of accrued gains.
Taxpayers may have previously engaged in transactions to avoid the application of the 21-year rule, including by distributing trust property on a tax-deferred basis to a corporate beneficiary owned by a new trust.
The new proposal would extend the scope of an anti-avoidance provision to capture indirect transfers of trust property to other trusts. This planning was previously designated as a notifiable transaction to the CRA under Canada’s mandatory disclosure rules.
Beyond amendments to the 21-year rule, the federal government plans to defer bare trust reporting by an additional year, with proposed reporting requirements now taking effect for taxation years ending on or after Dec. 31, 2026. Corporate groups that use entities as agents to hold legal titles to property in their corporate structure will have additional time to change holding structures or plan for filing.
Budget 2025 proposed that the CRA will leverage artificial intelligence (AI) and process automation to strengthen compliance and collections. This should allow CRA personnel to focus on complex corporate and cross-border tax matters.
The federal government also anticipates that additional resources will be available at the CRA from winding down internal programs tied to eliminated tax frameworks like the federal fuel charge, digital services tax and the Canadian carbon rebate.
Professional services businesses that engage in complex transactions, including those with an international component, may expect heightened scrutiny and audit activity from the CRA.
Budget 2025 featured proposals that focused on boosting Canada’s domestic resilience and enhancing competitiveness for the country’s consumer products industries.
It emphasized stronger enforcement, trade and supply chain investments, sustainability rules and a new, domestically targeted policy to boost local industries and jobs.
Further measures such as anti-greenwashing regulations and supply chain protections aim to enhance local production, ensure transparency and reduce reliance on foreign trade partners while supporting sustainable growth and job creation.
The federal government will invest $77 million over four years, plus $19.2 million in ongoing funding, to help the CRA deal with the misclassification of truckers as independent contractors.
This initiative includes ending the pause on reporting service fees in the trucking industry and improving data sharing with Employment and Social Development Canada.
Budget 2025 proposed eliminating the luxury tax on eligible aircraft and vessels. This change, effective Nov. 4, 2025, would apply to all sales, imports, leases and improvements.
Registered vendors must file a final return and can claim eligible rebates until Feb. 1, 2028, when registrations will be cancelled automatically.
To address GST/HST carousel fraud, Budget 2025 proposed a new reverse charge mechanism (RCM) for specified telecommunication services. It would shift tax collection responsibility to registered recipients who will self-assess and claim input tax credits.
Amendments to the Competition Act aim to reduce false or misleading environmental claims. Recognizing confusion under existing rules, Budget 2025 proposed clarifications to support legitimate sustainability efforts while maintaining consumer protection against greenwashing.
To achieve its goal of doubling non-U.S. exports within a decade, the federal government intends to invest in new trade and transportation infrastructure.
The Canada Infrastructure Bank will help assess and fund projects that enhance trade diversification and global connectivity.
Budget 2025 proposed investing over $25 billion to safeguard industries such as auto manufacturing, steel, aluminum, forestry and agriculture from tariffs and trade disruptions. Key initiatives include the $10 billion large enterprise tariff loan facility and a strategic response fund to modernize operations, support workers and enhance supply chain resilience.
The federal government also intends to prioritize domestic suppliers in federal procurement through a new policy; any exceptions would require ministerial approval. This proposed policy, supported by $185 million in funding, aims to boost Canada’s industrial capabilities, increase jobs and enhance social enterprises by including a new small and medium business procurement program to expand local participation.
This year laid bare how exposed Canada’s industrials sector is to trade disruptions, supply chain uncertainties and intensifying global competition.
To address these vulnerabilities, Budget 2025 introduced generational capital investments, expanded tax credits and a broad array of funding, loan and incentive programs for the industrials sector.
The federal government hopes this comprehensive industrial strategy of tax- and non-tax measures can accelerate nation-building infrastructure projects, catalyze private investment, diversify trade and respond to technological developments.
Industrial businesses that make capital investments will benefit from the budget’s proposed productivity super-deduction package of tax measures.
This package includes immediate expensing of a wide range of capital investments, including manufacturing and processing machinery, clean energy equipment and productivity-enhancing assets and enhanced first-year deduction for most capital assets.
Beneficiaries of this package are expected to have the lowest corporate marginal effective tax rate among G7 countries.
Budget 2025 also introduced immediate expensing for qualifying manufacturing and processing buildings acquired on or after Nov. 4, 2025.
Budget 2025 recommended enhancing the following partially implemented clean economy investment tax credits (ITC):
Budget 2025 included a plan to increase the expenditure limit for the scientific research and economic development (SR&ED) credit to $6 million. This measure would join other previously announced changes, including restoring eligibility for capital expenditures.
Administrative reforms were also proposed to improve predictability and streamline the application and approval process.
The proposed critical mineral sovereign fund (CMSF) and first and last mile fund (FLMF) aim to position Canada as a reliable supplier of industrial inputs.
CMSF would use equity investments, loan guarantees and offtake agreements to accelerate projects, while FLMF would move projects from exploration to production faster by closing infrastructure gaps in critical mineral value chains using clean energy and transportation solutions.
Canada’s automotive, steel and aluminum sectors are among the hardest hit by U.S. tariffs. The federal government intends to commit $5 billion over six years to support sectors affected by trade actions—with $1 billion allocated to strengthen steel supply chains through retooling support, market expansion and loan guarantees.
Budget 2025 provided long-term carbon pricing certainty and carbon contracts for difference to reduce risk on major low-carbon projects. These measures would reduce risk on major low-carbon projects in order to encourage investment in cleaner technologies and emissions reductions.
Budget 2025 presented a change in strategy to address housing and affordability with initiatives for developers and buyers alike.
Instead of relying on vacancy taxes like the underused housing tax (UHT), the federal government intends to invest in long-term solutions to stabilize supply and improve housing affordability. This shift is supported by rising home sales, easing interest rates and prices, moderated immigration and increased development activity over the last year.
Supply-side measures and incentives create a more predictable environment for developers and property investors. Businesses should consider leveraging accelerated capital cost allowance (CCA) and GST relief where eligible to support construction projects.
As for prospective buyers, now may be a strategic time to explore homeownership or invest in rental property given improving affordability and the introduction of new support mechanisms.
The proposed elimination of the UHT, starting for the 2025 calendar year, comes as the government moves away from punitive measures and more towards pro-growth, supply-side solutions.
While requirements remain in effect for the 2022 to 2024 calendar years, no filings or payments would be required for 2025 and subsequent years.
To ease entry into the housing market, the government proposed a GST/HST rebate for first-time home buyers on homes priced up to $1 million and a partial rebate for homes priced between $1 million and $1.5 million.
If that draft legislation receives royal assent, new homeowners could save up to $50,000 in GST/HST, making homeownership more attainable.
Budget 2025 reinforced earlier commitments to accelerate housing supply and confirmed compliance changes that could benefit real estate investors and developers. These include:
Beyond tax policy, the government is investing in long-term structural solutions to scale housing supply.
The new Build Canada Homes agency was created in September to double the pace of homebuilding over the next decade by financing construction, streamlining approvals and promoting cost-efficient building methods. It also supports workforce expansion and immigration moderation to ease housing pressure.
Existing mechanisms like the apartment construction loan program and mortgage loan insurance continue to support elevated levels of construction activity, particularly in the rental sector.
Budget 2025 emphasized technology and innovation by proposing enhancements to the SR&ED program and further investments in AI and intellectual property (IP).
Canadian tech businesses can capitalize these opportunities by consulting professional advisors to navigate these proposals and implement them effectively.
Budget 2025 proposed expanding the expenditure limit for the enhanced 35 per cent SR&ED credit from $3 million to $6 million to foster innovation in Canada.
This marks a notable change from the August draft legislation, which suggested an expenditure limit increase to $4.5 million. The additional $1.5 million would increase the amount of expenses eligible for SR&ED credits for small and medium-sized enterprises in particular—at a time where financial support is critical.
Budget 2025 introduced several measures to address the persistent underinvestment of IP by Canadian business due to the significant outlay of costs. These include:
While the performance review could increase compliance burden, the other measures offer both tax and non-tax support to Canadian businesses.
Budget 2025 announced investments in the CRA to enhance its use of AI and automation. These investments would target certain compliance and collection matters to allow the CRA to focus on more complex tax matters.
The CRA also intends to use AI to improve the administration of the SR&ED program, beginning April 1, 2026, by performing risk assessment on these claims and expediting the review process.
Additional proposals include:
Providing funding targeted to the media and art sector to promote Canadian arts and culture initiatives.
RSM contributors
Clara Pham, Partner
Michael Charette, Partner
Farryn Cohn, Sr. Manager
Simon Townsend, Sr. Manager
Irina Im, Sr. Manager
Kerin Yao, Sr. Manager
Sigita Bersenas, Manager
Chetna Thapar, Manager
Cassandra Knapman, Manager
Kevin Hans, Sr. Associate
Jim Niazi, Associate
Benjamin Wilson, Associate
Ruby Lai, Associate
Melanie Ma, Intern
Shixuan Tian, Intern
