What the proposal would do
Budget 2026 proposes a Canada Growth Incentive (CGI) capital-gains exemption for Canadian-resident individuals who dispose of qualifying shares of a qualifying corporation. The proposed exemption could apply to up to $15 million of capital gains per individual, per business. The measure is not the same as the existing Lifetime Capital Gains Exemption and would have its own eligibility rules.
The proposal is aimed at founders, employees, and investors in qualifying Canadian businesses. It would generally apply to qualifying shares issued on or after November 5, 2026—the Budget 2026 announcement date—and before 2037.
Core eligibility conditions
The proposed rules are highly specific. Among other requirements:
- The individual must generally be at least 18 when acquiring the shares.
- The individual must be resident in Canada throughout the year in which the exemption is claimed.
- At issuance, the corporation must generally be a Canadian-controlled private corporation.
- The corporation’s assets must principally support a qualifying business carried on primarily in Canada, or be reasonably intended for that use within 36 months.
- The combined carrying value of assets of the corporation and related corporations must not exceed $100 million immediately before and after issuance.
- The shares generally must be held for at least 36 consecutive months immediately before disposition.
- At disposition, the corporation must be Canadian-resident and meet the relevant private- or Canadian-listed-public-company conditions.
These tests mean that a company cannot assume that every founder or employee share issuance will qualify.
Example
Suppose a Canadian founder receives newly issued shares in a qualifying corporation on December 1, 2026, retains them for more than three years, and sells them in 2030 after the business has remained principally Canadian and within the applicable asset limits. If the proposal becomes law in its current form and all conditions are satisfied, some or all of the resulting gain could potentially fall within the CGI exemption, subject to the $15-million limit and other restrictions.
By contrast, buying shares from an existing shareholder may not satisfy the proposed issuance requirement. The holding-period and corporate-asset tests also require careful documentation.
Interaction with existing relief
The CGI exemption would interact with the Lifetime Capital Gains Exemption. Using one exemption for a sale of shares of a particular corporation could limit the ability to use the other exemption for the same corporation. Business owners should model both outcomes rather than automatically claiming whichever exemption appears larger.
Practical planning checklist
- Maintain a complete share-issuance and capitalization history.
- Track the corporation’s Canadian business activities and asset composition.
- Review related-corporation holdings when testing the $100-million asset threshold.
- Document employment-service consideration where shares are issued to employees.
- Obtain professional advice before reorganizations, share exchanges, or estate freezes.
- Do not treat the proposal as enacted until implementing legislation receives the required approvals.
The proposal creates a potentially valuable planning opportunity, but eligibility depends on facts maintained over several years. Early records and disciplined corporate administration may be as important as the eventual sale transaction.