Key Tax Updates for Canadian Small Businesses in 2025

As we enter 2025, several important tax changes are set to impact small businesses across Canada. Staying informed is crucial for effective financial planning and compliance. Here’s a summary of some of the the key updates:

1. Canada Pension Plan (CPP) Enhancements Contribution Rates and Maximums: In 2025, the CPP continues its phased enhancements, resulting in adjustments to contribution rates and an increase in the maximum pensionable earnings. Employers should review these changes to ensure accurate payroll deductions and budget for increased contributions.

2. Mandatory Electronic Filing Thresholds

Information Returns: Effective January 2025, businesses filing six or more information returns—such as T4 (Statement of Remuneration Paid), T5 (Statement of Investment Income), and T3 (Statement of Trust Income Allocations and Designations)—are required to file them electronically. Failure to comply may result in penalties, making it essential for businesses to adapt to electronic filing systems promptly.

3. GST/HST Electronic Filing Requirements

Mandatory E-Filing: For GST/HST reporting periods beginning in 2025, all registrants, except charities and selected listed financial institutions, must file their returns electronically. Non-compliance may lead to penalties, so businesses should ensure they are prepared to submit returns through the appropriate electronic channels.

4. Canada Carbon Rebate for Small Businesses

Refundable Tax Credit: The Canada Carbon Rebate aims to return a portion of federal fuel charge proceeds to eligible Canadian-controlled private corporations (CCPCs) with 499 or fewer employees. Eligible businesses that filed their 2023 tax return by December 31, 2024, will receive payments by December 31, 2024. This initiative is expected to deliver over $2.5 billion to approximately 600,000 Canadian businesses.

5. Reporting Requirements for Trusts

New Obligations: Trusts are now required to file an annual T3 Trust Income Tax and Information Return, including Schedule 15, for tax years ending after December 30, 2023. This measure aims to enhance transparency of beneficial ownership information, and trustees should familiarize themselves with the new reporting obligations to ensure compliance.

6. Province of Employment Policy

Remote Work Considerations: Effective January 1, 2025, new guidelines have been established to determine an employee's province of employment for tax purposes, particularly concerning remote work agreements. Employers should assess these changes to ensure accurate provincial tax withholdings and compliance with jurisdictional tax laws.

7. Liaison Officer Service

Support for Small Businesses: The Canada Revenue Agency offers a free, confidential Liaison Officer service to help small business owners and self-employed individuals understand their tax obligations. This service provides personalized guidance, assisting businesses in navigating the complexities of tax compliance.

Staying updated on these developments will help your business navigate the evolving tax landscape in 2025. For detailed information and additional resources, visit the Canada Revenue Agency’s official website.