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On November 4, 2025, the federal government introduced Canada Strong: Budget 2025 ("Budget 2025"), the first tabled by the Liberals under Prime Minister Mark Carney's leadership. In response to ongoing economic pressures, including tariffs, Budget 2025 vows to reduce operational spending, increase investments in workers, businesses and infrastructure, strengthen the domestic economy and support long-terms growth. Budget 2025 includes tax measures to promote investment in manufacturing, clean energy and research and development and to improve efficiency in Canada's tax system.
Some of Budget 2025's significant tax measures include:
- introducing temporary immediate expensing for eligible manufacturing and processing buildings, allowing 100% first-year deduction for property used before 2030 (to be gradually phased out by 2033);
- expanding eligibility for SR&ED credits to certain Canadian public corporations and increasing the expenditure limit and phase-out thresholds for the enhanced 35% tax credit;
- broadening the 21-year deemed disposition rule for direct trust-to-trust transfers to also capture indirect transfers of trust property;
- limiting the deferral of refundable tax on investment income achieved through tiered corporate structures with staggered year-ends;
- clarifying FAPI treatment of investment income from assets held by foreign affiliates to back Canadian insurance risks;
- modernizing and reforming Canada's transfer pricing rules.
Members of Dentons' Tax group, together with a team at Wolters Kluwer, have prepared a Special Report which provides a detailed analysis of the key tax components in Budget 2025.
Download the complimentary Special Report here.
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