Changes in taxes in Canada in the recent past have brought in a number of changes that have a dramatic impact on small businesses. This is important in that business owners are able to understand such changes so as to navigate the changing tax situation and make informed decisions.
1. Increase in Capital Gains Inclusion Rate
Among the most significant ones is the rise of the capital gains inclusion rate to 66.6% as of June 25, 2024. This change will imply that a great percentage of capital gains will be taxed, and this may raise the tax burden on businesses disposing of capital assets.
The government has, however, come up with ways of alleviating the effects, which include maximizing the lifetime capital gains exemption of qualifying individuals and businesses.
“Adapting to tax reforms requires proactive planning and a keen understanding of their implications. Small businesses that stay informed and seek professional guidance can turn these challenges into opportunities for growth.“ – Shayan Rashid, SRJ Chartered Professional Accountants
2. Reduction in Credit Card Transaction Fees
Since October 19, 2024, small businesses in Canada will pay a maximum of 27 per cent less on credit card transaction fees. It is projected that this reduction will save those qualified businesses more than C$1 billion within a five-year period, resulting in financial relief and motivating digital transactions.
3. Implementation of the Digital Services Tax
Digital Services Tax (DST) is a new tax applied to the revenue of the digital services of Canadian origin that will be implemented on June 28, 2024. This tax is imposed on both foreign companies and Canadian companies whose worldwide annual revenues are at least 750 million or higher and annual revenue of at least 20 million of digital services in Canada.
Although the DST is expected to guarantee that big digital platforms will have their fair share in the Canadian taxation system, small businesses operating with the big digital platforms might see extra expenditure on the basis that the service provider will levy extra charges on them.
4. Temporary GST/HST Relief on Essential Goods
On December 14, 2024, the Tax Break for All Canadians Act temporarily eliminated the Goods and Services Tax (GST) and the Harmonized Sales Tax (HST) on some basic commodities, such as food, children’s clothing, and books. This relief, which ran out on February 15, 2025, gave temporary finances to consumers and businesses involved in these products.
5. Carbon Tax Adjustments
The federal carbon tax which is one of the major aspects of the Canadian green policy has been establishing a rising degree of opposition owing to its effects on small businesses. In April 2024, the tax was raised to CAD 80 per metric ton, which will cause an increase in operational costs of energy-intensive industries. The new Prime Minister, however, made the announcement of abolishing the federal consumer carbon tax in March 2025, with the effective date of April 1, 2025, in order to reduce financial strain on businesses and consumers.
Conclusion
These tax reforms also pose a challenge and an opportunity to small businesses in Canada. Some of these reforms will add up to cost, but others offer opportunities to save and to relieve. Business owners must be updated on these changes and should seek advice from tax professionals to manage these changes well.