Key Takeaways
- • Budget 2026, tabled November 5, 2026 by Canada's Minister of Finance and National Revenue François-Philippe Champagne, proposes a new Canada Growth Incentive including a capital gains exemption on up to $15 million in gains from qualifying shares for qualifying Canadian-resident individuals (other than trusts).
- • The enhanced small business rollover would defer capital gains on sales of qualifying Canadian businesses where proceeds are reinvested in another Canadian small business.
- • Taxable Canadian property rules would see reduced withholding and remittance rates for non-resident corporate vendors, plus relief for fully tax-deferred section 85 transfers if the election (CRA Form T2057 or T2058) and CRA notification are filed within 30 days of disposition.
- • The Form T1135 foreign property reporting threshold would rise from $100,000 to $200,000 in cost amount, and the simplified reporting threshold would increase from under $250,000 to under $500,000.
Summary
Canada's federal budget, titled "Masters of our Destiny" and tabled on November 5, 2026 by Minister of Finance and National Revenue François-Philippe Champagne, announces several measures intended to encourage investment in Canadian businesses and simplify tax compliance, according to McCarthy Tétrault's analysis of the budget.
The centrepiece is the proposed Canada Growth Incentive, which combines two elements. The first is a new capital gains exemption for qualifying Canadian-resident individuals (excluding trusts) on up to $15 million of capital gains realized on the disposition of qualifying shares. The second is an enhanced small business rollover that defers capital gains on the sale of shares of qualifying Canadian businesses where the proceeds are reinvested in another Canadian small business. For private equity sponsors and founders contemplating exits, these provisions bear directly on deal structuring and seller after-tax proceeds.
The budget also amends the taxable Canadian property rules. Non-resident corporate vendors would benefit from reduced withholding and remittance rates, and fully tax-deferred section 85 transfers would be relieved from withholding and remittance requirements, provided the required election (CRA Form T2057 or T2058) and notification to the Canada Revenue Agency are filed within 30 days of the disposition. Timing compliance will be important for cross-border M&A transactions.
On compliance, the budget proposes raising the cost amount threshold for filing Form T1135, the foreign property reporting form, from $100,000 to $200,000, and expanding simplified reporting to entities with cost amounts under $500,000, up from under $250,000.
The budget also signals enforcement and information-reporting developments. It proposes consultations on measures to close gaps and strengthen Canada's Common Reporting Standard (CRS) in areas where it diverges from the OECD's CRS, and strengthens administrative penalties under the CRS and other frameworks, including the Reporting Rules for Digital Platform Operators and the Crypto-Asset Reporting Framework. Finally, the government reaffirmed its intent to expand its bilateral tax treaty network to reduce barriers to trade and investment and to position Canada as a competitive location for pension and sovereign wealth funds.
McCarthy Tétrault notes that these measures are summarized in its 2026 Canadian Federal Budget Commentary on tax initiatives. Partners Jeremy Ho (Vancouver) and associate Emma Murrin (Montréal) are named as contacts.
The centrepiece is the proposed Canada Growth Incentive, which combines two elements. The first is a new capital gains exemption for qualifying Canadian-resident individuals (excluding trusts) on up to $15 million of capital gains realized on the disposition of qualifying shares. The second is an enhanced small business rollover that defers capital gains on the sale of shares of qualifying Canadian businesses where the proceeds are reinvested in another Canadian small business. For private equity sponsors and founders contemplating exits, these provisions bear directly on deal structuring and seller after-tax proceeds.
The budget also amends the taxable Canadian property rules. Non-resident corporate vendors would benefit from reduced withholding and remittance rates, and fully tax-deferred section 85 transfers would be relieved from withholding and remittance requirements, provided the required election (CRA Form T2057 or T2058) and notification to the Canada Revenue Agency are filed within 30 days of the disposition. Timing compliance will be important for cross-border M&A transactions.
On compliance, the budget proposes raising the cost amount threshold for filing Form T1135, the foreign property reporting form, from $100,000 to $200,000, and expanding simplified reporting to entities with cost amounts under $500,000, up from under $250,000.
The budget also signals enforcement and information-reporting developments. It proposes consultations on measures to close gaps and strengthen Canada's Common Reporting Standard (CRS) in areas where it diverges from the OECD's CRS, and strengthens administrative penalties under the CRS and other frameworks, including the Reporting Rules for Digital Platform Operators and the Crypto-Asset Reporting Framework. Finally, the government reaffirmed its intent to expand its bilateral tax treaty network to reduce barriers to trade and investment and to position Canada as a competitive location for pension and sovereign wealth funds.
McCarthy Tétrault notes that these measures are summarized in its 2026 Canadian Federal Budget Commentary on tax initiatives. Partners Jeremy Ho (Vancouver) and associate Emma Murrin (Montréal) are named as contacts.
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