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Tax Planning 2025: Critical Year-End Considerations for Businesses & Individuals in Canada

Nov 24, 2025

As 2025 draws to a close, Canadian business owners and high-net-worth individuals face a pivotal moment for tax planning. With recent legislative changes and ongoing budget uncertainty, it’s more important than ever to proactively review your tax posture and year-end strategy. Below are the top considerations and tactics to help you mitigate risk, preserve value, and position yourself for 2026.

1. Understanding Key Legislative Changes

Capital Gains Inclusion Rate (CGIR) Uncertainty

  • The previously proposed increase of the capital gains inclusion rate has been deferred to January 1, 2026.
  • This delay creates planning flexibility — but also ambiguity. The Canada Revenue Agency (CRA) has extended relief measures, including waiving late-filing penalties and interest for certain capital gains‐related information returns.
  • For 2024 dispositions, reporting must still reflect the two-period split (pre- and post-June 25, 2024) on relevant tax schedules.

Digital Services Tax (DST) Cancelled

  • The 2025 guide notes the cancellation of the digital services tax.
  • This could remove a layer of compliance burden for businesses heavily engaged in digital platforms or online advertising, especially for multinational digital companies.

Evolving Tax Policy Through Budget Proposals

  • While the 2025 federal budget was delayed, RSM highlights that draft legislation firms up many of the 2024 proposals.
  • This ongoing uncertainty places a premium on proactive planning — waiting could mean missing favorable opportunities or being exposed to risk.

2. Strategic Capital Gains Planning

Given the unclear future of the CGIR, business owners and investors should consider the following:

  • Realizing Gains Early
    With the current (lower) inclusion rate, it may make sense to lock in gains now — especially for assets expected to appreciate further.
  • Leveraging Exemptions
    Even under uncertainty, exemptions remain powerful:
    • Lifetime Capital Gains Exemption (LCGE) for qualified small business corporation shares.
    • Principal Residence Exemption, where applicable.
    • Canadian Entrepreneurs’ Incentive (CEI), if eligible, which can reduce tax on the sale of a business.
  • Using Deferral Techniques
    Structures such as estate freezes, trusts, or section 85 rollovers may help defer gains or spread tax exposure over time.
  • Income-Splitting Strategies
    Consider transferring assets to family members in lower tax brackets (within attribution-rule constraints) to optimize the tax burden of future gains.
  • Portfolio Review
    Re-examine investment allocations. Holding investments in tax-advantaged accounts (e.g., TFSAs, RRSPs) or optimizing for gains/losses can improve outcomes.

3. Business & Corporate Tax Integration Considerations

  • Corporate Structure Review
    Evaluate how your business is structured (e.g., operating company vs. holding company) — the integration of private-company income affects how corporate earnings ultimately flow to shareholders.
  • Dividend vs. Salary Strategies
    Align compensation strategies (salary, dividends) with tax-efficient income flows and succession planning goals, considering the most current rate cards.
  • Provincial Rate Optimization
    Stay abreast of provincial tax rate changes. These directly affect business tax-planning decisions and should be incorporated in year-end projections.

4. Compliance & Risk Management

  • Audit Risk & Enforcement
    RSM warns of heightened audit risk: legislative changes, growing complexity, and CRA enforcement demand tighter documentation and compliance.
  • Transfer Pricing & International Exposure
    For multinational businesses, transfer pricing remains a core risk. Ensure intercompany transactions, pricing policies, and documentation are robust ahead of year-end.
  • Indirect Taxation
    With the cancellation of DST, revisit your indirect-tax compliance posture. Other indirect tax rules, such as customs or tariffs, may still carry risk.

5. Planning for 2026 & Beyond

  • Scenario Modelling
    Given the uncertainty around CGIR, run multiple tax-planning scenarios:
    • Status quo (inclusion rate remains ½)
    • Proposed increase to ⅔
    • Other tax policy shifts based on draft legislation
  • Budget Monitoring
    Keep a close eye on developments from the next federal budget — policy changes could significantly affect tax strategies.
  • Engage with Advisors
    Work proactively with your tax team (accountants, tax lawyers, corporate advisors) to build a coordinated year-end plan.
  • Liquidity Planning
    Ensure you have liquidity to address potential tax liabilities: for instance, if you crystallize gains, ensure the cash is available to pay the tax or to fund other planning vehicles.

6. Final Takeaways

  1. Act Now, but Strategically: The current deferral of the CGIR increase gives a window for favorable planning — but that window may not last.
  2. Use Sophisticated Planning Tools: Leverage exemptions, trust structures, and corporate reorganizations to minimize tax impact.
  3. Stay Compliant: Documentation, reporting, and transfer pricing must be clean and defensible.
  4. Adapt & Review: Your plan should remain flexible and be revisited as legislation evolves.

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