Tax Tip - What you need to know about the non-taxability of the Canada Carbon Rebate for Small Businesses

OTTAWA, ON, April 23, 2026 /CNW/ - The Canada Carbon Rebate for Small Businesses was a refundable tax that returned a portion of the federal fuel charge proceeds collected between 2019-2020 and 2024-2025 directly to eligible Canadian-controlled private corporations (CCPCs).

On March 26, 2026, the Government of Canada passed legislation that ensures the rebate is non-taxable for all fuel charge years. The Canada Revenue Agency (CRA) is reviewing T2 Corporation Income Tax Returns to identify businesses that may have included the rebate in their taxable income for the year it was received.

A flowchart depicting when the CRA will proactively review businesses who received the Canada Carbon Rebate for Small Businesses and reported it as taxable income in an effort to automatically adjust their T2 return, and when businesses need to request a reassessment. (CNW Group/Canada Revenue Agency)

Here's what this means for your business and what steps you may need to take.

• If your corporation filed before the announcement on June 30, 2025, in which the government committed to making the rebate tax-free, and:
  • There is clear indication that the rebate amount was reported at line 295 of Schedule 1, the CRA will automatically complete an adjustment to remove the amount from the calculation of your taxable income. No action will be required on your part.
  • There is no clear indication the rebate was included in taxable income, the CRA will reach out to request additional information to determine if an adjustment to your T2 return is needed.
• If your corporation filed after June 30, 2025, and included the rebate in taxable income:
  • You will need to submit an adjustment request: Requesting a reassessment of your T2 return.

Refer to the flowchart below for a visual depiction of this process.

Update on payment distribution

We have issued payments to the majority of eligible CCPCs.

Those that filed their 2023 tax return after July 15, 2024, and on or before December 31, 2024, will receive their retroactive payment in respect of the 2019-2020 to 2023-2024 fuel charge years by Fall 2026.

You can find detailed statistics on payment distribution at: Statistics - Canada Carbon Rebate for Small Businesses.

Contacts

Media Relations
Canada Revenue Agency
613-948-8366
[email protected]

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SOURCE Canada Revenue Agency