The upcoming holiday season may turn out to be a bit extra jolly for Canadian small businesses this year! The recent announcement from the Government of Canada brings significant support through the Canada Carbon Rebate for Small Businesses in the form of a tax credit by returning proceeds of $2.5 billion to approximately 600,000 Canadian-controlled private corporations (CCPCs) with 1 to 499 employees .
In a previous blog post, we discuss Canada Carbon Tax Rebate (Climate Action Incentive) for Individuals.
This blog post will break down the Canada Carbon Rebate for Small Businesses, how you can benefit, and the steps to take advantage of this opportunity.
Table of Contents
- Introduction to the Canada Carbon Rebate
- Eligibility Criteria
- Calculator: How Much Rebate Can You Receive
- How to Apply for the Rebate
- Frequently Asked Questions
- Conclusion
1. Introduction to the Canada Carbon Rebate
The Canada Carbon Rebate for Small Businesses is a federal initiative in the form of a tax credit designed to offset the costs associated with the carbon pricing system. Recognizing that small businesses are the backbone of the Canadian economy, the government announced significant new support to help mitigate the financial impact of carbon taxes.
Key Highlights:
- Applicable to 8 provinces (see below) that have the federal carbon tax regime.
- Return approx. $2.5 billion to small businesses by the end of 2024.
- The tax credit amount will be equal to the number of persons employed by the eligible corporation in the province in that calendar year multiplied by a payment rate specified by the Minister of Finance for the province for the corresponding fuel charge year.
2. Eligibility Criteria
To qualify for the Canada Carbon Tax Rebate, small businesses must meet specific criteria:
- Size of Business: Must qualify as a small business under the federal definition with 499 or fewer employees.
- Location: Operate in provinces where the federal carbon pricing system applies.
- Tax Compliance: Must be up-to-date with all federal and provincial tax obligations. Have filed a tax return for its tax year ending in 2023 no later than July 15, 2024.
Provinces Covered:
- Alberta
- Saskatchewan
- Manitoba
- Ontario
- New Brunswick
- Nova Scotia
- Prince Edward Island
- Newfoundland and Labrador
3. Calculator: How Much Canada Carbon Rebate Can Your Small Business Receive
The rebate amounts vary based on the province and the fiscal year. We have built a friendly little calculator for you to enter the number of T4 slips issued for your province of employment by year, and calculate your rebate amount right here. Go ahead and start entering your T4 slip numbers!
Note: Do not enter T4A or T5 slips here. T4A slips to subcontractors (and others) and T5 slips for Dividends are not eligible for this rebate.
Canada Carbon Rebate Calculator for Small Businesses
| Year | T4 Slips | Rate | Total |
|---|---|---|---|
| Grand Total: | |||
Here is a table by CRA for total amounts (in $ millions) that they plan to return to small businesses
Here are the tax credit rebate rates per year per employee for each province
Here is a sample calculation for the tax credit rebate for businesses, by number of employees from 2019 to 2023
Canada Carbon Rebate for small businesses is expected to continue for future years , including 2024-25, in a similar manner. Payments are made annually, and future continuance of the rebate will depend on government policy updates.
4. How to Apply for the Canada Carbon Rebate For Small Businesses
CCPCs do not have to apply for this rebate. CRA will calculate and automatically issue the rebate amounts to eligible CCPCs.
Eligible businesses that filed their 2023 tax return by July 15, 2024, will receive their payment by:
- December 16, 2024, if registered for direct deposit from the CRA; or,
- December 31, 2024, if receiving payment by cheque.
If you are not signed up for direct deposit, we recommend you do on your CRA My Business Account portal. While you are at it, ensure your mailing address on your CRA account is update, in case you do prefer receiving a cheque.
Unlike the Canada Carbon Rebate for Individuals (Climate Action Incentive), the rebate for small businesses will be a separate payment from the corporate tax payable/receivable.
5. Frequently Asked Questions
Q1: Do I need to apply for the rebate?
A1: No, the rebate will be automatically provided to eligible CCPCs that have filed their T2 tax returns.
Q2: Can new businesses apply for the rebate?
A2: Yes, as long as they meet the eligibility criteria and are operating in a province where the federal carbon pricing applies.
Q3: When will I receive the rebate?
A3: If you’re signed up for direct deposit, you will receive it by December 16, 2024. If not, a cheque will be mailed to you by December 31, 2024.
Q4: How can I ensure I receive the rebate via direct deposit?
A4: Sign up for direct deposit through the CRA’s My Business Account portal.
Q5: What if I haven’t filed my T2 tax return yet?
A5: File your return as soon as possible to ensure eligibility for the rebate.
Q6: Will the benefit continue after 2024?
A6: Yes, the benefit is expected to continue in a similar manner for future years, until announced otherwise. Payments are made annually, and future continuance of the rebate will depend on government policy updates.
Q7: Do non-incorporated businesses or partnerships qualify for the rebate?
A7: No, the rebate is specifically designed for CCPCs. Sole proprietorships, partnerships, and other non-incorporated entities are not eligible for this particular rebate.
Q8: Is the rebate considered taxable income?
A8: While no formal guidance is released on this yet, this is a refundable tax credit, which is generally not taxable income.
Q9: What if I have multiple businesses or operate in multiple provinces?
A9: Each CCPC is considered separately for rebate purposes. If you own multiple corporations, each eligible corporation will receive its own rebate. For businesses operating in multiple provinces, the rebate will be calculated based on the province where the corporation’s permanent establishment is located, as reported on the T2 tax return.
Q10: What if my business operates in a province that has its own carbon pricing system?
A10: The rebate applies to provinces where the federal carbon pricing system is in effect. If your business operates in a province with its own approved carbon pricing system (like British Columbia or Quebec), this particular rebate does not apply. Check provincial programs for similar support.
Q11: Will the rebate be administered as part of my corporate tax return (i.e. increase the refund or reduce my payable)?
A11: No, unlike the Canada Carbon Rebate for Individuals (Climate Action Incentive), the rebate for small businesses will be a separate payment from the corporate tax payable/receivable.
6. Conclusion
The Canada Carbon Rebate for Small Businesses is a welcome bonus for small businesses in Canada to offset higher costs of business these past few years.
After checking your eligibility and your payroll records for past 5 years, you should have a good idea of the tax credit you can expect by the end of the year!
