What’s Changing?
As of the 2026 Spring Economic Update, Canada proposes to make permanent the tax exemption on up to CA$10 million in capital gains for individuals (excluding trusts) who sell their business to an Employee Ownership Trust (EOT) or worker cooperative corporation. Previously, this was only temporary (2024-2026) for such transfers.(budget.canada.ca)
How It Works—and Who Qualifies
The exemption applies when:
- You sell shares of a business to an EOT or a worker cooperative.
- Shares qualify under the rules (e.g. a qualifying business transfer).
- The gain being realized is the individual’s, not a trust’s gain.
Conditions include maintaining business character and fulfilling trust or cooperative requirements. The government is maintaining the existing framework.(dlapiper.com)
Practical Examples
| Scenario | What Happens Before | What Happens After Permanent Exemption | Potential Saving* |
|---|---|---|---|
| Owner A exits business sale to EOT in 2025 | Gains up to $10m exempt; sale in 2027 uncertain | Same exemption through 2027+ securely applicable | Avoids uncertainty around expiry |
| Owner B considering selling to worker co-op in 2028 | Might lose exemption if temporary lapses | Exemption remains available | Tax-bill potentially tens to hundreds of thousands lower |
| Owner C uses EOT transfer for business succession | Has to time sale before end of 2026 | No pressure to rush, better planning flexibility | Better terms, smoother transitions |
*Actual savings depend on personal circumstances, marginal tax rates, capital gains already used, etc.
Actionable Insights for Business Owners
- Evaluate if an EOT or worker co-op fits your business model. If successful, this route offers a tax-efficient exit strategy that supports employee ownership and continuity.
- Plan ahead, but without rush. With permanence, you no longer need to force a timeline before 2027 to secure the exemption.
- Engage tax and legal advisors to structure the transaction correctly—carryover basis, share valuation, and compliance are key.
- Communicate with employees—employee ownership requires governance, trust setup, and often culture change.
Broader Impacts for the Canadian Economy
- Encourages business succession planning that retains businesses locally.
- Supports growth of employee-centred governance models.
- Helps distribute wealth more evenly among stakeholders in a company.
In summary, this policy shift offers a powerful tool for owners and communities: a permanent, predictable way to transition ownership while preserving value and supporting employees. Business owners should now incorporate this into their long-term exit planning.