Entity Setup
What the Recent Consultation on Budget 2025 Tax Measures Means for Businesses and Investors
Canada’s Jan 29, 2026 consultation proposes changes affecting businesses—from investment tax credits in clean hydrogen to anti-avoidance rules; knowing the drafts helps you prepare.
By NomadicTax Research Team • 5-8 min read • March 15, 2026
## Overview of the consultation
On **January 29, 2026**, the Department of Finance released **draft legislative proposals** to clarify and implement several tax measures announced in Budget 2025 or earlier. ([canada.ca](https://www.canada.ca/en/department-finance/news/2026/01/government-launches-consultation-on-draft-legislation-for-previously-announced-and-technical-tax-measures.html?utm_source=openai)) These are **proposed**, not yet law, and feedback was due by **February 27, 2026**. ([canada.ca](https://www.canada.ca/en/department-finance/news/2026/01/government-launches-consultation-on-draft-legislation-for-previously-announced-and-technical-tax-measures.html?utm_source=openai))
## Key proposals that affect business and investment
| Measure | Purpose | Effective / Application Date* |
|--------|---------|-------------------------------|
| **Immediate expensing** for manufacturing/processing buildings | To support investment by allowing full expense deduction for certain buildings acquired after Budget Day and used before 2030; begins phasing out afterward. ([canada.ca](https://www.canada.ca/en/department-finance/news/2026/01/government-launches-consultation-on-draft-legislation-for-previously-announced-and-technical-tax-measures.html?utm_source=openai)) | Acquisition after Budget Day 2025; buildings used before 2030. ([canada.ca](https://www.canada.ca/en/department-finance/news/2026/01/government-launches-consultation-on-draft-legislation-for-previously-announced-and-technical-tax-measures.html?utm_source=openai)) |
| **Clean Hydrogen investment tax credit (CHE-ITC)** | Expand eligible production pathways to include methane pyrolysis; clarify technical rules. ([canada.ca](https://www.canada.ca/en/department-finance/news/2026/01/government-launches-consultation-on-draft-legislation-for-previously-announced-and-technical-tax-measures.html?utm_source=openai)) | Proposed changes would apply from December 16, 2024, the date methane pyrolysis was deemed eligible. ([canada.ca](https://www.canada.ca/en/department-finance/news/2026/01/government-launches-consultation-on-draft-legislation-for-previously-announced-and-technical-tax-measures.html?utm_source=openai)) |
| **Carbon Capture, Utilization, Storage (CCUS) ITC** | Add flexibility; allow designation of geological formations; align with policy intent. ([canada.ca](https://www.canada.ca/en/department-finance/news/2026/01/government-launches-consultation-on-draft-legislation-for-previously-announced-and-technical-tax-measures.html?utm_source=openai)) | Proposed effective from January 1, 2022 (credit’s availability date) ([canada.ca](https://www.canada.ca/en/department-finance/news/2026/01/government-launches-consultation-on-draft-legislation-for-previously-announced-and-technical-tax-measures.html?utm_source=openai)) |
| **Anti-avoidance measures** | Prevent use of tiered corporations with staggered year ends, trust transfers, hybrid mismatch arrangements, and ensure income from foreign affiliates is taxed properly. ([canada.ca](https://www.canada.ca/en/department-finance/news/2026/01/government-launches-consultation-on-draft-legislation-for-previously-announced-and-technical-tax-measures.html?utm_source=openai)) | Draft rules apply retroactively in many cases—since start dates of original measures. |
> *Exact law depends on finalized legislation and royal assent. See consultation for precise technical wording. ([canada.ca](https://www.canada.ca/en/department-finance/news/2026/01/government-launches-consultation-on-draft-legislation-for-previously-announced-and-technical-tax-measures.html?utm_source=openai))
## Implications & risk areas for businesses/investors
- **Tax planning must adapt**: For example, businesses considering investment in manufacturing buildings may want to acquire before deadlines under expensing, or else phase-out reduces benefit.
- **Clean hydrogen projects** should evaluate methane pyrolysis options—if planned retroactively, it may already benefit.
- **Structure changes**: Tiered corporations and trust-to-trust transfers are under repeated scrutiny; deferred years may be taxed.
- **Foreign affiliate income**: assets supporting insurance risks are proposed taxable, which could change foreign investment and holding structures.
## What to do now: proactive steps for compliance and strategy
1. Review your **investment schedules and capital purchases**: aim for qualifying acquisitions under favourable dates (e.g. before phase-outs).
2. Consult advisers if you hold or manage **trusts, layered corporations, or foreign affiliates**: adjust structure, documentation to mitigate exposure.
3. Project hydrogen, CCUS, exploration projects for eligibility under proposed credits; maintain compliance with our expense records and technical pathways.
4. Monitor legislative progress; if you use these tax incentives, be ready for changes at royal assent or in law.
## Example: Clean Hydrogen investor scenario
Suppose your business invested in clean hydrogen production using methane pyrolysis, beginning mid-2025. Under the new draft proposal, this pathway is now explicitly eligible, even though methane pyrolysis became eligible only in Dec 2024. If law passes, you’ll benefit retroactively, but must ensure all regulatory and investment documentation tracks technical requirements.
## Bottom line
These proposed changes signify the government’s intent to tighten rules, clarify tax credit eligibility, and close loopholes, while still promoting green and built-environment investment. The time between consultation and legislation is your window to assess how these changes affect current or planned transactions.