Business Tax Measures in Canada’s 2025 Federal Budget: Key Highlights for Canadian Companies

Introduction

Canada’s 2025 Federal Budget introduces several important business income tax measures aimed at encouraging investment, innovation, clean energy development, and fair tax practices. As part of our ongoing effort to keep clients informed, Aura Finance Inc has summarized the most relevant updates that business owners, manufacturers, and investors should be aware of.

1. Immediate Expensing for Manufacturing and Processing Buildings

To support Canada’s manufacturing sector, Budget 2025 introduces temporary immediate expensing for eligible manufacturing and processing buildings.

• Deduction: 100% in the first taxation year that the property is used for manufacturing or processing.
  
• Eligibility: At least 90% of the building’s floor space must be dedicated to manufacturing or processing goods for sale or lease.
  
• Phased Reduction:
  
  • 100% deduction for property first used before 2030.
    
  • 75% for property first used in 2030–2031.
    
  • 55% for property first used in 2032–2033.
    
• Effective: For eligible properties acquired on or after Budget Day.
  

This measure provides significant upfront tax relief for manufacturers, encouraging investment in modern production facilities.

2. Scientific Research and Experimental Development (SR&ED) Tax Incentive Program

The SR&ED program continues to be one of Canada’s most valuable supports for innovation.

Key updates include:

• Increasing the enhanced expenditure limit from $4.5 million to $6 million, allowing businesses to claim the 35% refundable tax credit on a larger amount of R&D spending.
  
• The phase-out thresholds for taxable capital remain expanded to $15 million to $75 million, providing more flexibility for mid-sized firms.
  
• The government reconfirms plans to extend SR&ED eligibility to Canadian public corporations and restore capital expenditure eligibility.
  

Effective: For taxation years beginning on or after December 16, 2024.

These changes make SR&ED even more attractive for both private and public companies pursuing innovation in Canada.

3. Agricultural Cooperatives – Patronage Dividends

Budget 2025 extends the temporary tax deferral on patronage dividends paid in shares by agricultural cooperatives.

• Members will continue to defer tax on eligible share dividends until the shares are disposed of.
  
• Extension: The measure now applies to eligible shares issued before the end of 2030.
  

This extension supports farmers and agricultural cooperatives in managing cash flow and reinvestment.

4. Expansion of the Critical Mineral Exploration Tax Credit (CMETC)

The CMETC provides a 30% tax credit for flow-through share investors financing exploration of critical minerals.

Newly eligible minerals include:

• Bismuth, cesium, chromium, fluorspar, germanium, indium, manganese, molybdenum, niobium, tantalum, tin, and tungsten.
  

Effective: For expenditures renounced under flow-through share agreements after Budget Day and before March 31, 2027.

This expansion aligns with Canada’s clean energy and resource security strategy, encouraging investment in sustainable mining exploration.

5. Clean Technology Manufacturing Investment Tax Credit

This 30% refundable credit applies to investments in machinery and equipment used in clean technology manufacturing or the processing of critical minerals.

Budget 2025 expands eligible minerals to include:

• Antimony, indium, gallium, germanium, and scandium.
  

Effective: For property acquired and available for use on or after Budget Day.

This broadening of eligibility will strengthen Canada’s leadership in green technology and supply chain resilience.

6. Carbon Capture, Utilization, and Storage (CCUS) Investment Tax Credit

The CCUS tax credit supports businesses investing in technologies that capture and store carbon emissions.

Budget 2025 extends full credit rates for five more years, meaning:

• Full rates (60%, 50%, and 37.5%) apply to eligible expenditures through 2035.
  
• Reduced rates (30%, 25%, and 18.75%) apply from 2036 to 2040.
  

The review of CCUS rates is also postponed to 2035, providing investors with long-term stability in the program.

7. Clean Electricity Investment Tax Credit

The Clean Electricity Investment Tax Credit (15%) promotes investment in low-emission power generation, electricity storage, and interprovincial transmission.

Key update:

• The Canada Growth Fund is now included as an eligible entity under this credit.
  
• Financing provided by the Fund will not reduce the cost base of eligible property for calculating the tax credit.
  

Effective: For property acquired and available for use on or after Budget Day.

This measure strengthens public-private cooperation in expanding Canada’s clean electricity infrastructure.

8. Preventing Tax Deferral in Tiered Corporate Structures

Some corporate groups have used mismatched year ends to defer taxes on investment income indefinitely.

Budget 2025 introduces a new rule to limit this deferral by:

• Suspending dividend refunds for payer corporations if the affiliated recipient corporation’s balance-due day falls after the payer’s balance-due day.
  
• Allowing refunds once dividends are paid out to non-affiliated corporations or individuals.
  

Effective: For taxation years beginning on or after Budget Day.

This change promotes fairness and prevents complex structures from being used for tax deferral purposes.

9. Clarifying Eligible Activities Under Canadian Exploration Expense (CEE)

Budget 2025 clarifies that expenses related to determining the economic viability or engineering feasibility of a mineral resource do not qualify as Canadian Exploration Expense (CEE).

Only expenses focused on discovering the physical characteristics of a mineral resource will continue to qualify.

Effective: As of Budget Day.

This clarification ensures consistent application of the CEE regime and prevents overly broad interpretations of exploration deductions.

Final Thoughts

Canada’s 2025 Federal Budget reflects a strong commitment to supporting innovation, clean technology, and fair tax administration while closing loopholes that allow tax deferral or ambiguity.

For business owners, manufacturers, and investors, these measures offer expanded incentives and clearer compliance rules—especially across the clean energy, manufacturing, and resource sectors.

At Aura Finance Inc., our Personal Tax Accountant in Toronto specializes in helping Canadian businesses navigate complex tax changes and identify opportunities for savings and growth under the latest budget measures. Our experienced team ensures you stay compliant while uncovering strategic ways to optimize your financial position.
✅ Claiming new and enhanced tax credits
✅ Strategic planning for capital investments
✅ SR&ED and clean energy incentives
✅ Compliance and audit preparation