The Canada Revenue Agency would like to provide additional clarification regarding the update to the non-taxability of the Canada Carbon Rebate for Small Businesses sent on March 30, 2026.

The Government of Canada has passed legislation that ensures the rebate is non-taxable for all fuel charge years. We are proactively reviewing certain T2 Corporation Income Tax Returns to identify businesses that may have included the rebate in their taxable income for the year it was received.

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, we 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, we 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.

For a visual depiction of this process, refer to the flowchart on our website at Tax treatment of the rebate.

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