Canada Carbon Rebate For Small Businesses: What You Need To Know

Eligible corporations that filed their 2023 tax return by July 15, 2024, will automatically receive the rebate this December.

As first introduced in the 2024 Federal Budget, the Canada Carbon Rebate offers eligible Canadian-Controlled Private Corporations (CCPCs) with up to 499 employees a refundable tax credit. This rebate aims to offset the costs associated with the federal fuel charge imposed in certain provinces. This article explores the eligibility requirements, payment schedule, and rebate calculations to help small businesses understand how this program may benefit them.

Key Eligibility Criteria

To qualify for the Canada Carbon Rebate, your business must meet the following conditions:

1. CCPC Status: The corporation must be a Canadian-Controlled Private Corporation (CCPC) throughout the relevant fuel charge year.
2. Employee Threshold: The business must have employed 499 or fewer employees across Canada for the relevant fuel charge year.
   1. This rebate is decided on a per-corporation basis and does not take into account employee count across associated corporate groups.
   2. If a parent corporation has over 500 employees, its subsidiaries may still qualify if they meet the eligibility criteria and maintain their own corporate RC (Corporate Income Tax) account.
3. Provincial Designation: The corporation must have employed at least one person in a designated province where the federal fuel charge applies.
4. Tax Return Filing Deadline: The corporation must have filed its 2023 tax return no later than July 15, 2024, to be eligible for the rebate, including retroactive payments.

How the Rebate Works

The Canada Carbon Rebate process is designed to be automatic, and businesses do not need to apply to receive the rebate. If a corporation is eligible, the rebate will be calculated based on the number of employees within the designated provinces and issued directly to the business. Eligible corporations will receive a notice confirming their rebate details. Most businesses can expect to receive their rebate by the end of 2024, with payments made via direct deposit by December 16, 2024, or by cheque no later than December 31, 2024. Further calculation details can be found at the end of this article.

In the first year of the rebate, there is also a retroactive payment for past fuel charge years, from 2019-2020 to 2023-2024, provided the following conditions are met:

• The business was a CCPC during the entire tax year ending in 2023.
• The 2023 tax return was filed by July 15, 2024.

Rebate Calculation

The rebate amount is calculated by multiplying the number of employees in the designated provinces by a rate specified for each province and fuel charge year. You can use the CRA's Estimator Tool to calculate your expected rebate. The amount per employee ranges from $26 to $233, depending on the province and year.

Conclusion

If your business operates in a designated province, has 499 or fewer employees, and filed its corporate income tax return by July 15, 2024, your business could be eligible for a rebate, with payments starting in December 2024. Be sure to review the CRA's guidelines and use the estimator tool to understand your rebate amount.

If you have any questions regarding how these changes may impact your business or any other accounting, tax planning, or business advisory items, please contact your Bateman MacKay Business Advisor. Topical accounting, tax, and business advisory articles pertinent to business owners can be accessed by subscribing to our blog and following us on LinkedIn.

Calculation Details

Provincial Designation and Payment Table

The rebate applies to businesses operating in provinces where the federal fuel charge is in effect. Below is a summary of the designated provinces for retroactive payments and the applicable years:

Note: Provinces/Territories such as British Columbia, Yukon, Northwest Territories, Nunavut, and Quebec are not designated and are ineligible for the carbon rebate.

Definition of Employee

For the purposes of this rebate, an employee is defined as someone who:

• Was employed by your corporation at any time during the relevant calendar year, AND
• Was issued a T4 Statement of Remuneration from your corporation.

There is no distinction between full-time, part-time, or seasonal employees. The provincial designation for a particular employee is based upon what was reported in Box 10 of the employee's T4 slip for the applicable year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.