We've been hearing from CPA Canada members seeking clarity on whether the Canada Revenue Agency (CRA) treats the Canada Carbon Rebate for Small Businesses (CCR-B) as taxable income.
While the former Minister of Finance previously indicated on X (formerly Twitter) that these payments would be non-taxable, no draft legislation has been released by the Department of Finance or tabled in the House of Commons to confirm this position.
As it stands, and unless specific legislation suggests otherwise, CCR-B payments are considered taxable upon receipt.
We understand the importance of certainty in tax matters for businesses, and we will continue to monitor developments and provide updates as they become available.
See below for commentary from the CRA:
Taxability of CCR-B payments
Subsection 127.421(6) of the Income Tax Act, which came into force on June 20, 2024, provides that an amount of CCRB received by a taxpayer is assistance received from a government. Generally speaking, paragraph 12(1)(x) of the Act provides that government assistance received in the course of earning income from a business or property must be included in income in the tax year in which it is received and is therefore subject to income tax, provided it has not otherwise been included in income or used to reduce the cost of a property or the amount of an expense.
In a statement posted on the social media platform X (formerly Twitter) on November 12, 2024, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance indicated that the CCRB would be "tax free". This was reiterated in a news release from the Department of Finance published on November 25, 2024, which provided an update on the government's economic plan.
Unfortunately, the CRA cannot speak to matters of tax policy in the absence of draft or enacted legislation and any potential change in the taxability of the CCRB is a tax policy matter, which is the responsibility of the Department of Finance.
The Department of Finance has not yet released draft legislation subsequent to Ms. Freeland's initial statement on X. The CRA generally does not administer potential changes to the tax system in the absence of draft legislation.
If you have any further questions with respect to tax policy, they should be addressed to the Department of Finance.
Originally posted on LinkedIn on December 20, 2024
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Ryan Minor
Chartered Professional Accountants of Canada
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