2025 provincial budget commentary
As we progress in 2025, Canada’s provinces and territories are poised to release their budget plans for the upcoming year. Read RSM Canada's commentary on four provincial budgets—Alberta, British Columbia, Quebec and Ontario—as our tax team explores the key tax and economic considerations associated with the proposed changes.
Alberta budget highlights
Tax relief for individuals
Alberta officially introduced an 8% tax bracket for the first $60,000 of income, effective Jan. 1, 2025, and proposed a related tax credit.
Increasing tax measures to drive revenue
The provincial government announced increases to the education property tax and cancelled certain credits to ease administrative burdens.
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Alberta’s provincial government introduced its 2025 budget and fiscal plan (Alberta Budget 2025) with new measures intended to manage the unique political and economic climate—including the looming threat of U.S. tariffs and the federal government’s proposed increase to the capital gains inclusion rate.
The province’s budget does not introduce significant tax expenditures. This may be due to projected deficits because of threatened U.S. tariffs and the reduction of oil prices.
Delivered by provincial Finance Minister Nate Horner, Alberta Budget 2025 noted that eliminating interprovincial trade barriers could help investment and productivity gains across the country and aid in managing existing uncertainties.
Individual tax measures
New personal income tax bracket
Alberta’s government introduced a new personal income tax bracket of 8 per cent on the first $60,000 of income, effective Jan. 1, 2025, as part of its goal to reduce income taxes. The measure was previously announced in last year’s budget.
Taxpayers in the province will start seeing the reduction in payroll withholdings on their paycheques after July 1, 2025. From 2026 onwards, this tax bracket will be adjusted annually for inflation. However, any increases will require consultation through a referendum as required by the Alberta Taxpayer Protection Act.
The new tax rate is expected to provide further financial relief to taxpayers—in comparison to other provinces—and boost Alberta’s tax competitiveness.
Supplemental credit
Alberta Budget 2025 introduced a new tax credit designed to ensure that Albertans who claim more than $60,000 in non-refundable tax credits do not face higher taxes due to the new tax bracket.
While such a scenario may be uncommon, it could affect individuals earning over $60,000 who also claim significant amounts of non-refundable credits.
This credit, effective for the 2025 tax year, will be 2 per cent of the total non-refundable tax credits that exceed $60,000 and will be adjusted annually starting in 2026.
By implementing this measure, Alberta’s government aims to provide additional financial relief while maintaining fairness in the tax system to ensure that taxpayers are not unduly penalized for claiming legitimate tax credits.
Other tax measures
Education property tax
Alberta’s budget also outlined an increase in education property taxes. The following will take effect in the 2025-26 fiscal year:
- Residential and farmland properties will see an increase to $2.72 per $1,000 of equalized assessment of the property’s value.
- Non-residential properties will see an increase to $4.00 per $1,000 of equalized assessment of the property’s value.
This follows a freeze in education property tax increases from the 2024-25 fiscal year.
Locomotive fuel tax
Tax on fuel used to operate trains, including generating heat or light, will increase from 5.5 cents per litre to 6.5 cents per litre effective March 1, 2025. This change puts Alberta’s tax rate for this fuel in alignment with other Prairie provinces.
Cancelled tax credit programs
As of Dec. 31, 2025, taxpayers in the province will no longer be able to use late filings and reassessments to claim the previously eliminated Alberta climate leadership adjustment rebate and Alberta family employment tax credit.
The Alberta government cited overly burdensome administration costs in maintaining the programs.
British Columbia budget highlights
Increasing home availability
B.C. will increase its speculation and vacancy tax rates, effective Jan. 1, 2026, to help with housing supply.
Investing in small businesses
The province increased its annual credit limit for the small business venture capital tax credit to encourage early-stage equity investments in B.C. small businesses.
Focusing on clean energy
Provincial sales taxes on used zero-emission vehicles will be reinstated on May 1, 2025 despite B.C.’s ongoing investment in clean energy initiatives.
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British Columbia’s provincial budget and fiscal plan for 2025 (B.C. Budget 2025) includes measures intended to attract business investments, encourage housing affordability and support families.
The budget, delivered by provincial Finance Minister Brenda Bailey on the same day widespread U.S. tariffs took effect, emphasized the importance of implementing measures to mitigate any immediate economic impact while also fostering long-term economic stability.
Individual tax measures
New speculation and vacancy tax rates
Effective Jan. 1, 2026, B.C. will increase speculation and vacancy tax (SVT) rates from 0.5 per cent to one per cent for Canadian citizens and permanent residents who are taxed worldwide earners. The budget also stated the rate for foreign owners and untaxed worldwide earners will increase from two per cent to three per cent.
These new rates will not affect taxpayers that need to file tax declarations for the use of residential property (RP) in 2025 or earlier calendar years. Additionally, the non-refundable SVT credit for B.C. residents will be doubled from $2,000 to $4,000.
The increase in SVT rates aims to deter taxpayers from using RPs as investment assets and instead encourage their use as primary residences.
Amendments to B.C. family benefit
Effective Jan. 1, 2025, B.C. family benefit payments will continue for six months after a child's death to grieving families. This puts the province in alignment with a similar federal amendment to the Canada Child Benefit.
The benefit aims to provide continued support to affected families after a child's death.
Changes to training tax credit for apprentices
The training tax credit for individuals will be extended for three additional years—until the end of 2028.
Furthermore, taxpayers eligible for the enhanced credit for First Nations individuals and persons with disabilities will continue to receive the enhanced credit effective April 1, 2025.
The amendment—which extends beyond the expiration of the federal apprenticeship incentive grant on March 31, 2025—aims to support a more diverse workforce in trades.
Corporate tax measures
Small business venture capital program budget and tax credit
B.C. Budget 2025 proposed increases to the small business venture capital program and tax credit in an effort to encourage equity investments in the province’s businesses.
Effective for 2025 and subsequent taxation years, the annual credit limit a taxpayer can claim for investments made on or after March 4, 2025 increased from $120,000 to $300,000.
The credit applies to investments made in shares of a registered venture capital corporation or an eligible business corporation.
Clean buildings tax credit deadlines extended
To support the CleanBC initiative, a refundable income tax credit is provided for qualifying retrofits to eligible commercial and multi-unit residential buildings with four or more units. The credit amount is five per cent of qualifying expenditures.
The new budget proposed extending the following deadlines to continue supporting investment into clean buildings:
- Qualifying expenditures deadline moved to March 31, 2026 (from April 1, 2025).
- Qualifying retrofit completion date moved to March 31, 2027 (from April 1, 2026).
- Retrofit certificate application submission due date moved to Sept. 30, 2028 (from Sept. 30, 2027).
- Energy usage intensity measurement moved to March 31, 2028 (from March 31, 2027).
Film and interactive digital media tax credits amendments
B.C. Budget 2025 introduced several amendments to tax credits relevant to the film, animation and interactive digital media industries.
The basic film incentive B.C. tax credit will increase from 35 per cent to 40 per cent and the basic production services tax credit will increase from 28 per cent to 36 per cent—effective for productions with principal photography beginning on or after Jan. 1, 2025.
A new major production tax credit is now available, effective Jan. 1, 2025, which equals two per cent of accredited qualified B.C. labour expenditures in respect of the major production. Claimants with B.C. production costs greater than $200 million are eligible, and the credit is available upon completion of the production.
Effective Jan. 1, 2025, the regional and distant location tax credits will be available for animation productions—provided the following criteria are met:
- Principal photography begins on or after Jan 1, 2025.
- Production takes place in a physical office in a regional or distant location.
- Workers are physically present and working in the office at least 50 per cent of the time.
Beginning Sept. 1, 2025, the interactive digital media tax credit will increase to 25 per cent (up from 17.5 per cent) for eligible salaries and wages paid in the province. The budget also proposed that the program be made permanent.
Other tax measures
Provincial sales tax reinstated on used zero-emission vehicles
Starting May 1, 2025, used zero-emission vehicles will be subject to provincial sales tax (PST). This ends the exemption introduced in the 2022 budget that was originally set to expire in 2027.
Provincial sales tax adjustment for out-of-province vehicles
Effective on royal assent, amendments to the Provincial Sales Tax Act will clarify that the PST payable on vehicles brought into B.C. for personal use is reduced by the amount of B.C. sales tax already paid by the person on the vehicle.
Carbon tax increase and climate action tax credit
B.C.’s government intends to ensure that revenue from federal carbon tax increases is returned to British Columbians through the climate action tax credit. Annual carbon tax increases are currently set at $15/tonne until it reaches $170/tonne in 2030.
Due to lower-than-expected revenue and uncertainty around federal carbon pricing, the province’s 2024-25 climate action tax credit amounts will be maintained for the 2025-26 year.
Exemption for First Nations property ownership
Effective May 21, 2024, First Nations are exempt from property transfer tax when transferring legal ownership of a property to the First Nation—provided they beneficially owned prior to the effective date.
Quebec budget highlights
Resource development
Quebec’s government enhanced existing tax credits for mining corporations involved in critical and strategic mineral resourcing, as well as a renewed credit for traditional mineral projects.
Revamped R&D program
With uncertainties created by ongoing tariff tensions, the provincial government proposed overhauling its R&D program to foster innovation and improve business competitiveness.
Strengthening foreign property reporting
To promote tax compliance, a new reporting requirement for foreign property held outside Canada will be introduced and administered by Revenu Quebec.
Survive and thrive in an evolving technology environment
Quebec’s 2025 budget plan (Quebec Budget 2025) projects a large deficit and features new measures intended foster research and development in the province and build on critical resource development.
Delivered by provincial Finance Minister Éric Girard, Quebec Budget 2025 includes investments in new projects to diversify the province’s markets and provide critical support to residents and businesses.
Individual tax measures
Age limit lowered for refundable child-care tax credit
The age limit for children eligible for the province’s refundable tax credit for child-care expenses will be reduced from under 16 years old to under 14 years old beginning in 2026. There will continue to be no age limit for children with a severe and prolonged impairment in mental or physical functions.
Enhanced credit for bereaved parents
The Quebec family allowance and other similar financial assistance programs for low- and middle-income families will be extended for 12 months following the month of an eligible dependent child’s death.
Changes on tax credits for medical expenses
Starting in 2026, only expenses for medical services provided by practitioners who are members of a professional order in Quebec will be eligible for the province’s medical expenses tax credit.
New criteria for non-refundable tax credit on tuition and examination fees
Quebec updated its criteria for recognizing educational institutions eligible for the province’s non-refundable tax credit for tuition and examination fees. Beginning in 2026, institutions offering training and courses that do not meet certain tax policy objectives will no longer be eligible for the credit.
Updating additional registration fee for luxury vehicles
The threshold for the luxury vehicle tax will be raised from $40,000 to $62,500, effective on or after Dec. 31, 2026. The exemption for electric and plug-in hybrid vehicles will be withdrawn.
The 1 per cent rate for vehicles exceeding $62,500 will be applied annually to better align with current market conditions.
Annual contribution for electric and plug-in hybrid vehicles
To align with existing contributions made by motorists on fuel tax and registration fees, Quebec’s new budget proposed an annual contribution of $125 for electric vehicles and $62.50 for plug-in hybrid vehicles, which will be indexed annually.
This new fee will be in addition to fees payable to put a vehicle on the road after Dec. 31, 2026, or to fees payable to retain the right to drive after that date.
Abolishing tax credits
Revenu Quebec intends to eliminate several tax measures it considers to be inefficient or infrequently used, including:
- Synergy capital tax credit
- Abolishing biodiesel fuel tax refund
- Tax shield
- Tax credit for contribution to political parties
- The foreign researcher tax holiday
- The foreign expert tax holiday
- The tax holiday for foreign specialists of an international financial centre
- The tax holiday for foreign specialists in the financial services sector
- The tax holiday for crew engaged in international transportation of freight by ship
- The tax credit for patronage gift
- Deduction related to acquisition of income-averaging annuity from artistic activities
Corporate tax measures
Modernization of the tax credits for AI and amendments to R&D credits
Quebec Budget 2025 intends to modernize tax credits for e-business development to focus on high value-added activities that integrate artificial intelligence (AI). The tax legislation will be amended to:
- Refocus on e-business integrating AI functionalities: Eligible activities for employee certificate purposes will be required to be primarily related to e-business integrating AI capabilities to a significant extent.
- Add data processing and hosting activities: These will be added to the list of eligible activities to promote the eligibility of AI businesses and modernize the criteria for obtaining a corporation certificate.
- Remove activities relating to maintenance or evolution: Activities related to the maintenance or evolution of information systems or technology infrastructures will be removed from eligible activities for employee certificate purposes, applicable to taxation years beginning after Dec. 31, 2025.
- Reduce the tax assistance granted to corporations that carry out intercompany outsourcing: This support will be halved when at least 50 per cent of a corporation's gross revenue is derived from specified activities for non-arm's length beneficiaries outside Quebec.
The province is also revamping its tax measures related to research and development (R&D) activities to enhance business competitiveness and productivity.
One key change involves consolidating existing R&D tax measures into a new refundable tax credit covering R&D, innovation and pre-commercialization to simplify the system by eliminating ineffective measures.
Renewed tax credit for critical and strategic minerals
Quebec renewed its tax credit for mining resources to support the development of critical and strategic minerals (CSMs) due to their importance in renewable energy, electric vehicle batteries and advanced technology production.
The key changes include:
- Including development expenses to eligible expenses: The definition of “eligible expenses” will be amended to include development expenses, applicable to costs incurred after March 25, 2025.
- Revising tax credit rates for mining resource expenses: The rates will be revised to 22.5 per cent for specified qualified corporations and 10 per cent for other qualified corporations, applicable to eligible expenses incurred after March 25, 2025.
- Temporary enhancements for CSMs: The tax credit rates for eligible expenses relating to CSMs will be enhanced to 45 per cent for specified qualified corporations and 20 per cent for other qualified corporations CSMs—provided they were incurred and paid before Jan. 1, 2030. After that date, the standard rates for mining resource expenses will apply.
- Limit on eligible expenses of $100 million per five-year period: The budget introduced a cap of $100 million per five-year period on eligible expenses of a qualified corporation or partnership, applicable to taxation years or fiscal periods starting after March 25, 2025.
Amendments to the flow-through regime
Quebec’s flow-through share regime is designed to foster the discovery of mineral resources in the province by facilitating access to capital to finance eligible exploration and development expenses.
The new budget amended this regime by abolishing the additional deductions for certain exploration and surface mining expenses incurred in Quebec. This was done to offer exploration corporations competitive tax assistance while improving consistency with the federal system.
These changes will apply to flow-through shares issued after March 25, 2025—except for shares issued before Jan. 1, 2026, under specific conditions.
The provincial government will further amend the flow-through share regime by abolishing the additional capital gains exemption for certain resource properties. This change will apply to dispositions made after the day of the budget speech.
Tax credit for digital transformation of print media extension
Currently, Quebec’s refundable tax credit for the digital transformation of print media is available for qualified expenditures and qualified wages incurred before Jan. 1, 2025, and expenditures relating to the acquisition of a qualified property acquired before Jan. 1, 2024.
The new provincial budget extended the refundable tax credit eligibility period to Dec. 31, 2025 with the goal of further stimulating digital conversion. Qualified property must be acquired before Jan. 1, 2025, to benefit from the extended tax credit.
Other tax measures
New reporting requirement for residents’ foreign property
Quebec residents—including individuals, corporations, and trusts—will be subject to a new reporting requirement to disclose foreign property holdings whose total cost exceeds $100,000 annually. Previously, Revenu Quebec relied on existing information exchange mechanisms with the CRA to obtain this information based on the current federal Form T1135.
Foreign property includes shares in foreign corporations, interests in foreign trusts, partnerships and non-resident debts. The effective date for this reporting has not been determined.
Non-compliance will lead to penalties and Revenu Quebec will have additional time to reassess affected taxpayers.
Harmonizing insurance premium tax rate
Starting Dec. 31, 2026, the insurance premium tax rate will align with the Quebec sales tax at 9.975 per cent, up from the current 9 per cent. This change is intended to simplify compliance for the insurance industry by harmonizing the two rates.
Expansion of required documentation in construction sector
Businesses and individuals in the construction sector will need to hold an Attestation de Revenu Quebec to obtain and renew construction licenses from the Régie du bâtiment du Quebec. This document confirms compliance with tax obligations. This mandatory requirement was introduced with the hope it will combat tax evasion—in which the construction sector remains at higher risk.
Ontario budget highlights
Building more homes
Ontario plans to invest heavily in building local infrastructure and improving access to rental housing.
Investing in manufacturing
The province proposes enhancing the manufacturing tax credit to increase the competitiveness of the manufacturing sector.
Focusing on energy and critical minerals
The government is dedicating billions to develop processes for mining and refining critical minerals in its efforts to enhance the energy sector.
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As Ontario grapples with U.S. tariffs and ongoing economic uncertainty, the province’s 2025 budget and fiscal plan focuses on providing support to workers and businesses through new and enhanced measures to develop the energy sector and stimulate infrastructure and home-building.
The $232.5 billion budget, presented by provincial Finance Minister Peter Bethlenfalvy, projects a $14.6 billion deficit in 2025-26—a drastic increase from the government’s previous estimates in last year’s budget and the fall economic statement. This is due to a renewed focus on spending to respond to the changing economic environment.
Here are some of the major takeaways from Ontario Budget 2025.
Corporate tax measures
Deferring select Ontario-administered taxes
Ontario Budget 2025 reaffirms an earlier proposal that, from April 1, 2025 to Oct. 1, 2025, businesses paying taxes under 10 of Ontario’s business-focused tax programs can defer payments for taxes owed without incurring any interest and penalties.
Ontario businesses must file their tax returns on time during this period.
Enhancing and expanding key manufacturing credit
The new budget outlines proposals that would both expand and enhance the Ontario Made Manufacturing Investment Tax Credit (OMMITC).
Currently, the OMMITC is a 10 per cent refundable corporate income tax credit for Canadian-controlled private corporations (CCPCs) making eligible investments in Ontario.
Eligible investments include expenditures for constructing, renovating or acquiring buildings used for manufacturing or processing—as well as machinery and equipment used in the manufacturing or processing of goods in the province.
The new proposals include:
- Temporarily increasing the current OMMITC rate from 10 per cent to 15 per cent, applicable to CCPCs that make eligible investments in property that becomes available for use between May 15, 2025 and Jan. 1, 2030.
- Expanding the eligibility of the OMMITC to non-CCPCs that have a permanent establishment in Ontario and make eligible investments between May 15, 2025 and Jan. 1, 2030. The proposed OMMITC for non-CCPCs would be non-refundable but could be carried forward up to 10 subsequent taxation years.
- Enhancing the integrity of the OMMITC by requiring repayment of the credit if relevant capital property is sold, converted to a non-manufacturing or processing use, or if certain assets move out of Ontario within five years.
Ontario presented these proposals with the goal of encouraging future investment in the province’s manufacturing industry—including from corporations that may be controlled by non-residents. This signals a policy intent to make Ontario more attractive for foreign capital investment.
Introducing a rail maintenance credit
The Ontario Shortline Railway Investment Tax Credit (OSRITC) is a proposed refundable corporate income tax credit for capital and labour expenditures related to railway maintenance.
If approved, the refundable tax credit of 50 per cent could represent a robust incentive for eligible corporations to invest in the maintenance of Ontario railways at a time when building and maintaining infrastructure is critical.
According to the new budget, the OSRITC would be:
- Applied at a rate of 50 per cent for eligible railway-related maintenance expenditures between May 15, 2025 and Jan. 1, 2030—limited to $8,500 per track mile in Ontario.
- Eligible for corporations licensed provincially under the Shortline Railways Act or federally under the Railway Safety Act, excluding urban rail transit systems and industrial railways.
- Available in respect to eligible investments including capital investments in depreciable property—specifically Classes 1, 3, or 13—for capital cost allowance purposes and labour expenditures directly related to railway track maintenance performed by Ontario residents in the province.
Individual tax measures
Introducing a fertility treatment tax credit
Effective Jan. 1, 2025, the provincial government will offer the new Ontario Fertility Treatment Tax Credit (OFTTC) to support individuals with eligible medical expenses related to fertility treatment for conceiving a child.
The OFTTC will be a refundable personal income tax credit equal to 25 per cent of eligible expenses, up to a maximum of $20,000, resulting in a maximum annual credit of $5,000.
Expenses related to fertility treatment, fertility preservation and surrogacy in Canada will be eligible, provided they are paid by the individual or their spouse or common-law partner. The OFTTC will be available in addition to the existing non-refundable federal and Ontario medical expense tax credits.
Supporting affordable rental housing
As part of Ontario’s broader goal of increasing housing supply, municipalities will be allowed to reduce property tax rates by up to 35 per cent for eligible affordable rental housing units beginning in 2026.
The province also eliminated the 13 per cent HST on qualifying new purpose-built rental housing as part of its efforts to support affordable rental housing.
As a result of these measures, taxpayers investing in or operating eligible affordable rental housing in Ontario will now have a lower overall tax burden.
Other tax measures
Introducing updates to the gasoline and fuel tax framework
To provide relief to individuals and businesses, the Ontario government proposes:
- Introducing new legislation to permanently keep gasoline and diesel tax rates at nine cents per litre. The reduced rates introduced in July 2022 were set to expire in June 2025.
- Eliminating the tax on propane used in licensed road vehicles starting July 1, 2025.
If enacted, these measures could reduce compliance costs and be particularly beneficial to households and small businesses.
Upcoming alcohol tax and mark-up changes
The province will implement the following changes, effective Aug. 1, 2025, to modernize the liquor market and support local producers:
- The spirits basic tax will be reduced from 61.5 per cent to 30.75 per cent.
- Microbrewers will benefit from a reduced beer tax rate of 17.98 cents per litre for draft beer and 19.88 cents per litre for non-draft beer.
- The Small Beer Manufacturers’ Tax Credit, a refundable corporate tax credit, will be amended to align with new tax rates.
Ontario Budget 2025 also proposed increasing the LCBO wholesale discount rate for beer, wine, cider, spirits and ready to drink (RTD) beverages from 10 per cent to 15 per cent, as well as reducing LCBO mark-up rates for ciders, wine-based RTD beverages and spirit-based RTD beverages.
Enhancing digital tax services for businesses
The new budget outlines Ontario’s plan to enhance the provincial tax system by simplifying processes, expanding digital services and reducing compliance costs for businesses through ongoing updates and improvements.
This includes delivering digital services to help businesses meet their tax responsibilities, such as enabling secure payment processes and the ability to manage tax accounts from any device.
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