Accounting Montreal • Corporate Tax Advisory
A practical summary of federal changes and the most notable provincial updates; plus how Accounting Montreal can help you plan and file with confidence.
Federal Business Tax Changes for 2025
Federal rates remain stable, but several rules and program updates may affect your 2025 filings and financial statements.
1) Interest & Financing Expense Limitation (EIFEL)
Effective: Taxation years starting on or after January 1, 2024.
- New cap generally limits deductible net interest/financing expenses to 30% of adjusted taxable income (post-transition).
- Impacts leveraged groups, intra-group loans, and debt-funded expansions.
💡 Accounting Montreal tip: Run an EIFEL impact review before filing; consider loan restructuring or rebalancing interest allocation.
2) Capital Gains Inclusion Rate
- The proposed increase to a two-thirds inclusion rate is not in effect for 2025; the traditional 50% inclusion rate remains.
- LCGE (lifetime capital gains exemption) on qualifying small business shares/farm/fishing property remains around $1.25M.
💡 Accounting Montreal tip: If you’re evaluating a sale, succession, or reorg, current rules may be favourable—plan early to optimize exemptions.
3) Voluntary Disclosures Program (VDP) Updates
Effective: October 1, 2025 (updated framework and guidance).
- Smoother pathway to correct past errors/omissions prior to enforcement actions.
💡 Accounting Montreal tip: If historical issues exist (income, GST/QST, late filings), consider a confidential VDP submission.
4) Digital Services Tax (DST) Repeal
- The 3% DST introduced in 2024 is being rolled back/repealed in 2025; refunds/credits may apply once legislation is finalized.
💡 Accounting Montreal tip: Digital platforms should review filings to capture any refundable amounts or offsets.
5) Federal Corporate Rates (Unchanged)
| Corporation Type | Federal Rate | Notes |
|---|---|---|
| General Corporations | 15% | Standard federal rate |
| CCPCs (SBD-eligible) | 9% | On first $500k of active business income |
Provincial & Territorial Highlights for 2025
Notable changes that may affect your combined corporate tax rate, incentives, or cash flow:
| Province / Jurisdiction | Key Change(s) | Impact / Notes |
|---|---|---|
| Prince Edward Island (PEI) | General & M&P rate reduced from 16% to 15% effective July 1, 2025. | Lowers combined federal-provincial burden; positive for manufacturers and service firms. |
| Nova Scotia (NS) | Small Business rate cut from 2.5% to 1.5% effective April 1, 2025. | Stronger SBD incentive; boosts competitiveness for SMEs. |
| British Columbia (BC) | Provincial carbon tax repealed as of April 1, 2025. | Reduces fuel/energy costs for transportation and manufacturing-heavy businesses. |
| Ontario (ON) | No change to corporate income tax rates in 2025. | Stable rate environment. |
| Quebec (QC) | Harmonized temporary deferrals for corporate income tax and QST remittances through June 30, 2025. | Short-term cash-flow relief; filing deadlines still apply. |
| Other Provincial Deferrals | Select provinces (e.g., ON) allowing short remittance deferrals in 2025. | Liquidity support for smaller businesses; verify local rules and due dates. |
What This Means for Your 2025 Year-End
- Interest deduction check: Model EIFEL exposure and consider debt-mix adjustments.
- Deferred tax updates: Reflect substantively enacted provincial changes in your tax accounts.
- Cash-flow planning: Align remittance deferrals with working-capital needs and filing schedules.
- Capital gains planning: With 50% inclusion still in place, reassess timing for sales, M&A, or succession.
**This article is for general information only and is not tax, legal, or accounting advice. Always consult your professional advisor regarding your specific situation.
