Tax Perspectives: Review of 2025 and 2026 Outlook

What tax developments will shape Canada’s economy in 2026?

Tax Perspectives: Review of 2025 and 2026 Outlook highlights the legislative changes, judicial decisions, compliance trends and policy signals that matter most to Canadian businesses, investors and non-profit organizations in 2026. It draws on an active tax reform period and provides practical guidance to help organizations plan for a fast-shifting tax environment. With developments ranging from proposed changes to Canada’s clean economy tax incentives to emerging crypto asset reporting obligations and modernized transfer pricing rules, the publication offers a clear view of the issues that will shape tax planning in 2026.

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Tax Perspectives: Review of 2025 and 2026 Outlook

Get in‑depth analysis, detailed summaries of legislative developments, and practical insights from our national tax team.

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Key Topics Covered

2025 Year‑in‑Review: What changed in Canadian tax?

A new minority Liberal government made good on its promise to “build Canada strong” by prioritizing targeted incentives and productivity measures. Parliament advanced legislation that affects income tax, commodity tax, transfer pricing, clean economy incentives and charities regulation. Organizations should expect continued reform in 2026 and prepare for compliance demands, shifting incentives and new administrative practices.

Productivity Super Deduction: What is new?

Several temporary measures were introduced to encourage Canadian investment. These include immediate expensing for SR&ED capital expenditures, immediate expensing for certain manufacturing and processing equipment, and enhanced capital cost allowance rates for specific liquefied natural gas assets.

Why it matters
The combined effect reduces Canada’s marginal effective tax rate. Businesses involved in manufacturing and clean energy can accelerate deductions to improve after‑tax results.

Global Minimum Tax Act and Pillar Two: How will Canada apply Pillar Two in 2026?

Budget 2025 confirmed Canada’s intention to proceed with previously announced amendments to the Global Minimum Tax Act, including the implementation of the undertaxed profits rule. Negotiations with international partners will continue to shape timing and scope.

Why it matters
Large multinational enterprises should prepare for compliance, data collection and potential top‑up tax obligations.

Crypto-asset Reporting Framework and Updated Common Reporting Standard: What new reporting rules will apply to crypto‑assets?

Draft legislation released in 2025 would introduce new reporting obligations for crypto‑asset service providers. The implementation of these reporting standards is proposed to commence in 2027.

Why it matters
Financial institutions, exchanges and service providers may face significant reporting and systems work. Early planning is essential.

SR&ED Program Evolution: What changes were proposed to the program?

Budget 2025 confirmed new eligibility for capital expenditures and expanded access to the refundable SR&ED investment tax credit for certain public corporations. The annual expenditure limit will rise to $6 million.

Why it matters
Companies investing in innovation may qualify for additional refundable credits when engaging in SR&ED.

Clean Economy Tax Credits: What is the status of Canada’s clean economy tax credits?

The government continued its previously announced implementation of a broad suite of incentives to promote investment for clean energy technology, clean electricity, hydrogen, carbon capture and clean technology manufacturing.

Why it matters
These incentives are reshaping investment decisions in energy, mining, manufacturing and infrastructure.

Bare Trust Reporting Deferred: Are bare trusts required to file in 2025?

Enhanced reporting rules applicable to trusts (including bare trusts) will now apply to taxation years ending on or after December 31, 2026. This extends relief for 2025 and provides additional time for compliance preparation.

Why it matters
Trustees, advisors and financial institutions should build reporting frameworks in respect of bare trusts in advance of the implementation of these enhanced trust reporting rules.

Modernized Transfer Pricing Rules: How are Canada’s transfer pricing rules changing?

The updated rules emphasize economic substance and actual conduct of the parties. Timeframes to provide the contemporaneous documentation requested by the Canada Revenue Agency will tighten to 30 days once requested.

Why it matters
Businesses should ensure that they diligently document their transactions with non-arm’s length non-residents and retain such contemporaneous documentation in the event of a potential audit.

GST/HST Updates: What are the key commodity tax changes for 2025?

Notable developments include the GST treatment of partnerships, the new Manitoba retail sales tax on cloud computing services and the proposed repeal of the Digital Services Tax Act.

Why it matters
Businesses offering digital services should reassess tax exposure and compliance processes.

Underused Housing Tax Repeal: Is the Underused Housing Tax still in force?

The government proposes to eliminate the underused housing tax beginning in 2025, but the reporting and compliance obligations remain for 2022 to 2024.

Why it matters
Notwithstanding the proposed repeal of the Underused Housing Tax Act, property owners and their advisors must continue to meet historic filing obligations to avoid penalties.

Tax Disputes and Litigation: What audit and dispute changes should taxpayers expect in 2026?

New audit powers will expand the CRA’s ability to demand information, suspend reassessment periods and compel responses under oath.

Why it matters
Businesses should prepare for more intensive audits, accelerated timelines and increased documentation burdens.

Charities and Non Profits: What changed for the charitable sector?

Although Budget 2025 introduced only minor amendments relating to charities and non-profit organizations, there were significant judicial decisions rendered in 2025 that impact charitable municipal property tax exemptions in Ontario and cross‑border gifts.

Why it matters
Non-profit organizations may have new pathways to access municipal property exemptions in Ontario but charities should continue to be cautious when making cross-border gifts to non‑qualified donees.

Why Work With McCarthy Tétrault

McCarthy Tétrault’s Tier 1 National Tax Group is widely recognized for its deep expertise across Canada’s tax regime. With leading experience in tax planning, tax disputes, tax litigation, and specialized sales and commodity tax, we bring integrated strength to both the boardroom and the courtroom.

We advise on the tax aspects of complex domestic and cross‑border transactions, including mergers and acquisitions, reorganizations, financings, and securitizations—delivering clear, practical solutions to issues that can otherwise stall business objectives. We also guide clients through the full range of tax controversies, from audits and objections to searches, seizures, and appeals. In working with us, clients gain a team with experience on some of the most complex tax issues and precedent-setting cases across the country.