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On November 4, 2025 ("Budget Day 25") the Federal Government tabled Budget 2025.1 As part of Budget 2025, the Government introduced several tax measures, including proposed amendments to the Income Tax Act (Canada) (the "Tax Act"), aimed at maintaining Canada's role as a global leader in the critical minerals space and continuing its journey to a net-zero economy. These measures are summarized below.
Extension of Mineral Exploration Tax Credit
Budget 2025 confirms the Government's intention, originally announced on March 3, 2025, to extend availability of the 15% mineral exploration tax credit (the "METC") available to subscribers of flow-through shares in resource issuers undertaking certain grassroots exploration activities.2 Under the current legislation, the METC would not apply to flow-through share agreements entered into after March 31, 2025, so confirmation that the Government intends to proceed with the extension, as previously announced, is welcome.
Critical Mineral Exploration Tax Credit
The Critical Mineral Exploration Tax Credit ("CMETC") is a 30% tax credit available to investors who subscribe for flow-through shares in mining companies that explore for certain critical minerals. The list of eligible critical minerals currently includes copper, nickel, lithium (including lithium from brines), cobalt, graphite, rare earth elements, scandium, titanium, gallium, vanadium, tellurium, magnesium, zinc, platinum group metals, and uranium.
Budget 2025 proposes that the list of eligible critical minerals be expanded to include bismuth, cesium, chromium, fluorspar, germanium, indium, manganese, molybdenum, niobium, tantalum, tin, and tungsten.3 The proposed expansion of the eligible critical minerals list would apply to investments in flow-through shares issued under agreements entered into after Budget Day 25 and on or before March 31, 2027.4
Canadian Exploration Expense
Canada's flow-through share regime generally permits principal business corporations to renounce to subscribers of flow-through shares certain qualified expenditures incurred in the exploration phase of a mineral project's life. Expenditures capable of such renunciation must constitute "Canadian exploration expenses" ("CEE") as defined in the Tax Act, and generally constitute expenses incurred for the purpose of determining the existence, location, extent or quality of a mineral resource in Canada.
Budget 2025 proposes to amend the definition of CEE to clarify that expenses related to determining economic viability or engineering feasibility of a mineral resource do not constitute CEE and are therefore not capable of renunciation pursuant to a flow-through share agreement.5 This amendment is effective as of Budget Day 25.
Clean Electricity Investment Tax Credit
The Clean Electricity Investment Tax Credit ("CE ITC"), which is a 15% refundable tax credit (reduced to 5% in certain circumstances) in respect of the capital cost of eligible property and equipment used in the generation, storage and transmission of electricity, was first proposed in Budget 2023. Budget 2024 contained further details regarding the design and implementation of the program, proposed to be available in respect of new (i.e., not previously used) eligible property and equipment acquired and available for use on or after April 16, 2024 and before 2035, but the program has not yet been enacted. Budget 2024 restricted availability of the CE ITC to Canadian corporations, certain provincial and territorial Crown corporations, corporations owned by municipalities, corporations owned by Indigenous communities, pension investment corporations, and certain tax-exempt Canadian corporations.
Budget 2025 proposes that the Canada Growth Fund be expressly included as an entity eligible for the CE ITC, effective as of Budget Day 25.6 Additionally, recognizing that the Canada Growth Fund may act as an investor in other eligible entities, Budget 2025 proposes that financing provided by the Canada Growth Fund would not reduce an eligible entity's cost of property for purposes of computing entitlement to the CE ITC.7
Clean Technology Manufacturing Investment Tax Credit
The Clean Technology Manufacturing investment tax credit ("CTM ITC)" is a 30% refundable tax credit in respect of the capital cost of eligible property and equipment used in the manufacture of renewable energy equipment (e.g., equipment used to manufacture solar, wind, water or geothermal equipment) or the extraction and processing of certain critical minerals (lithium, cobalt, nickel, copper, rare earth elements and graphite).
Budget 2025 proposes to expand eligibility for the CTM ITC to support polymetallic extraction and processing by adding to the list of eligible critical minerals the following: antimony, gallium, germanium, indium and scandium.8 The expanded list will apply in respect of property that is acquired and becomes available for use on or after Budget Day 25.
Carbon Capture, Utilization and Storage Investment Tax Credit
The carbon capture, utilization and storage investment tax credit ("CCUS ITC") is a refundable tax credit in respect of the capital cost of certain eligible equipment utilized in the capture, utilization and storage of carbon. The rate of the credit ranges from 37.5% to 60% depending on the particular use of the eligible equipment. Under the current legislation, the CCUS ITC is available in respect of expenditures incurred prior to 2041, but the applicable rate of the CCUS ITC gradually decreases between 2031 and the end of 2040.
Budget 2025 proposes to delay the onset of reduced credit rates by five years such that the current full rates will apply to expenditures until the end of 2035 and the reduced rates would begin to take effect thereafter.9
Footnotes
1. Government of Canada, "Budget 2025: Canada Strong", (November 4, 2025) [Budget 2025].
2. Budget 2025, p 347.
3. Ibid.
4. Ibid.
5. Budget 2025, p 351.
6. Budget 2025, p 349.
7. Ibid.
8. Budget 2025, p 348.
9. Ibid.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2025
