On March 15, 2025, the Government of Canada announced regulations to cease the application of the federal fuel charge. As a result, this eliminated the Canada Carbon rebate for small businesses.
Canada’s Finance Minister, Francois-Philippe Champagne, announced on June 30, 2025, that if draft legislation is passed on Monday, July 7, small businesses will not have to pay income tax on carbon rebates they receive.
What is the Canada Carbon Rebate for Small Businesses?
The Canada Carbon Rebate for Small Businesses is a refundable tax credit that returns a portion of the federal fuel charge proceeds directly to Canadian-controlled private corporations (CCPCs). The rebate was launched in 2024 and provides automatic, refundable credits to approximately 600,000 small to medium sized corporations across Canada, in an effort to offset the carbon tax based on the number of eligible employees. The credit reimburses a portion of the federal fuel charge collected from 2019–20 through 2023–24 for eligible small CCPCs.
Incoming Changes
As of April 1, 2025, the Canadian Government set the federal fuel charge tax to $nil. Although there are still final rebate payments to come, these rebates will be tax-free. Additionally, past payments from previous years will also not be included in taxable income. Some businesses will have to file amended returns once the legislation has passed to remove this rebate from taxable income, further extending this process into the fall.
The Canada Revenue Agency reminds us that small businesses do not need to apply for this rebate. All eligible businesses will automatically receive payment based on the number of eligible employees.
Going forward
The Canada Revenue Agency (CRA) announced on their social media yesterday (July 4, 2025) that eligible small businesses should file their 2024 tax return by July 15, 2025, to qualify for the Canada Carbon Rebate payment for the 2024-2025 fuel charge year.
Have questions? At S+C, we are here to help.
Please give us a call at 905-821-9215 or send an email to info@scpllp.com if you have any questions concerning these changes.
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