While the fairness or efficacy of Canada’s carbon tax may be highly contestable, it does offer small businesses an opportunity to gain a tax-free rebate from the Federal government to offset additional expenses incurred due to the federal carbon pricing scheme. The carbon rebate is meant to compensate small businesses for expenses incurred from additional charges on fuels such as gasoline, diesel, natural gas, and propane. The rebate does not address additional expenses resulting from the Output-Based Pricing System (OBPS) that generally targets larger businesses with more significant levels of industrial emissions. The goal of the rebate is two-fold: to ensure Canada’s Carbon tax remains within its guiding principle of “revenue neutrality,” ensuring that the tax is meant to decrease Canadian emissions and NOT serve as a revenue-generating scheme for the federal government. Secondly, to ensure the competitiveness of Canadian small businesses is not reduced due to additional costs.
The carbon rebate will be applied retroactively on fuel charges from 2019/2020 to 2023/2024. While the exact rebate rates for each province are still unknown, Finance Minister Freeland has recently clarified that the rebate will be tax-exempt. In order to qualify for the rebate, small businesses must meet the following criteria:
- They must have employed one or more persons in a designated province in the calendar year in which the fuel charge year begins;
- They must have had 499 or fewer employees throughout Canada in that calendar year, and
- They must file their corporate income tax return for the tax year ending in 2023 no later than July 15, 2024.
The carbon rebate is available to small businesses in provinces where the federal fuel charge applies. As of November 25, 2024, the eligible provinces and their respective years of applicability are as follows: Alberta (2020 to present), Saskatchewan (2019 to present), Manitoba (2019 to present), Ontario (2019 to present), New Brunswick (2019 to 2020), Nova Scotia (2023 to present), Prince Edward Island (2023 to present), Newfoundland and Labrador (2023 to present).
While the criteria for eligibility can seem straightforward, the process of actually seeking out the rebate and communicating your business’ eligibility can be anything but straightforward. VN Accounting Solutions can help properly analyze your small business structure and ensure you send in your corporate tax return error-free and on time, maximizing savings and obtaining all applicable rebates (not just the carbon one!)
VN Accounting Solutions is proud to be one of Canada’s top accounting firms with three physical locations: Mississauga, Bowmanville, and Brampton.
Have questions about tax matters being Ontario Taxpayers? We’re here to assist!
Email us at info@vnaccountingsolutions.com or give us a call. We look forward to hearing from you!