Bill C-31 Second Act Implementing Provisions in Budget Tabled 2025

C-31 A Second Act to Implement Certain Provisions of the Budget Tabled in Parliament on November 4, 2025

Short Title: Budget 2025 Implementation Act, No. 2

Bill Type: House Government Bill

Bill Sponsor: Minister of Finance and National Revenue

PART 1 — Income Tax Act and Income Tax Regulations (Sections 1–143)

• Temporary immediate expensing — manufacturing/processing buildings: 100% write-off in year of acquisition for eligible manufacturing or processing buildings, phasing down after 2029. Effective November 4, 2025
• Temporary immediate expensing — eligible greenhouses: Same 100% write-off for eligible greenhouse buildings, phasing down after 2029. Effective November 4, 2025
• Automatic federal benefits for lower-income individuals (new s. 150(1.5)): Minister can file a return on behalf of eligible lower-income individuals who haven't filed — deemed filed unless individual corrects within 90 days. Applies to 2025 and subsequent tax years
• Anti-avoidance — trust-to-trust transfers: Rule expanded to cover indirect transfers of trust property to other trusts, not just direct transfers. Retroactive to April 16, 2024
• Tiered corporate structures — mismatched year ends: New rules limit deferral of tax on investment income where corporations use tiered structures with different fiscal year ends
• Canadian exploration expenses: "Inherent natural qualities" replaces prior wording to clarify what qualifies — applies to expenses renounced under flow-through share agreements entered into on or after November 4, 2025
• Crypto-Asset Reporting Framework (CARF): New information return filing requirements for crypto-asset service providers added to the Income Tax Regulations
• Debt forgiveness — bankrupt entities: Bankrupt corporations, trusts and partnerships removed from the exception to the debt forgiveness rules. Retroactive to April 16, 2024 (corporations) and August 12, 2024 (partnerships and trusts)
• Tax debt anti-avoidance (s. 160): New deemed transfer rules — if a series of transactions is structured to avoid joint and several liability, the transferor is deemed to have transferred property directly to the transferee; consideration is deemed nil in avoidance transactions. Retroactive to April 16, 2024
• Clean hydrogen investment tax credit: Expanded to include hydrogen produced from methane pyrolysis as an eligible production pathway
• Canada Carbon Rebate: No CCR payments will be made in respect of tax returns or adjustment requests filed after October 30, 2026
• Qualified/prohibited investment rules: Consolidated and simplified into new Part L of the Income Tax Regulations (ss. 5000–5006), effective January 1, 2027. Removes standalone "qualified investment" definitions from individual registered plan provisions (RRSP, RRIF, RESP, TFSA, FHSA, RDSP) and centralizes them
• Foreign affiliate surplus — DMTT integration: Domestic minimum top-up tax (Pillar Two) payments by foreign affiliates now integrated into exempt, hybrid and taxable surplus calculations, retroactive to December 31, 2023
• Pension plan amendments: Capital guarantee benefits, VPLA fund transfers, disability benefit medical certification expanded to nurse practitioners and psychologists, current service contribution limits updated
• RESP — designated subscriber: New rules allow the Minister responsible for the Canada Education Savings Act to be a subscriber, enabling automatic RESP enrollment for eligible children
• Home Buyers' Plan: Repayment grace period extended to 2032
• Labour Mobility Deduction: Annual limit increased; distance threshold reduced to 120 km
• EV Affordability Program: Integrated with existing CCA rules effective February 16, 2026
• Canada-Russia Income Tax Agreement: Suspended effective November 18, 2024; all obligations and rights deemed extinguished during suspension
• Anti-avoidance — Air Travellers Security Charge Act, Excise Act, 2001, Select Luxury Items Tax Act: Parallel deemed transfer and nil consideration anti-avoidance rules applied across these Acts, retroactive to April 16, 2024
• Coordinating amendments: Contingent on Bill C-30 (Spring Economic Update 2026) receiving royal assent — adjustments to manufacturing building CCA rules
• Technical amendments: Numerous corrections to inconsistencies and alignment with policy intent throughout

PART 2 — Global Minimum Tax Act and Related Legislation (Sections 144–176)

• UTPR (Undertaxed Profits Rule) — new Part 2.1: Canada now implements the UTPR, which subjects Canadian constituent entities of large multinational groups to top-up tax in respect of low-taxed profits of group entities in other jurisdictions that are not already subject to an Income Inclusion Rule (IIR) or qualified domestic minimum top-up tax (DMTT). Applies to fiscal years beginning on or after December 31, 2025
• "Reverse hybrid entity" definition repealed — no longer needed under updated GloBE framework
• Substitute loss carry-forward recapture amount: Definition updated to cover situations where a domestic source tax loss is offset against income of a foreign subsidiary or permanent establishment and can be recaptured in subsequent years
• Unclaimed accrual: Definition updated to include aggregations of deferred tax liabilities and to cover elections under new s. 25(7)
• Specified jurisdictional effective tax rate (new s. 4.1): New rule for blended controlled foreign company tax regimes — determines the effective tax rate applicable to a parent entity's share of a subsidiary's income attributed under a blended CFC regime
• Asset transfer rules (s. 48): Updated to account for deferred tax assets that were not created or were reversed solely because a gain on transfer was included in domestic taxable income; no reduction to adjusted covered taxes from newly created deferred tax assets
• Joint and several liability — UTPR: Canadian constituent entities are jointly and severally liable for tax payable by other group members under Part 2.1 (UTPR) and Part 3 (DMTT). Applies to fiscal years beginning on or after December 31, 2025
• Foreign affiliate surplus — DMTT integration (Income Tax Regulations s. 5907): Domestic minimum top-up tax payments integrated into exempt, hybrid and taxable surplus calculations; new DMTT group and domestic minimum top-up amount definitions; rules for primary/secondary affiliate payment arrangements and transparent affiliate situations. Retroactive to December 31, 2023
• Foreign tax credit — DMTT regime (ITA s. 126): DMTT payments excluded from business-income tax and non-business-income tax calculations to prevent double-counting; new apportionment formula for DMTT group members. Retroactive to December 31, 2023
• Access to Information Act: Schedule II reference to Global Minimum Tax Act updated (section 121 → section 123)
• Income Tax Conventions Interpretation Act (new s. 4.4): Tax treaties cannot prevent the application of the Global Minimum Tax Act or require Canada to provide relief for similar legislation in other states. Retroactive to January 1, 2024
• Tax Court of Canada Act: Informal procedure cross-references to Global Minimum Tax Act updated (ss. 89 and 91)
• Technical amendments: Numerous corrections to GloBE Model Rules implementation, administrative guidance from the OECD Inclusive Framework, and alignment with intended policy objectives throughout

PART 3 — Sales Tax

Division 1 — Excise Tax Act / Selected Listed Financial Institutions Regulations (Sections 196–214)

• Ss. 196–199: Technical fixes to how selected listed financial institutions (SLFIs) — insurers, investment plans, banks, trust/loan corps — calculate their provincial percentage for HST apportionment. Retroactive to August 9, 2022 or August 4, 2023 depending on subsection
• S. 200 (new s. 24(4)): Nil net premiums rule — if the B variable in the insurer percentage formula is zero, fall back to the general s. 23(2) method. Applies to reporting periods ending after August 12, 2024
• S. 201: Trust and loan corporations — replaces "real property" terminology and clarifies loan-based revenue apportionment. Retroactive to August 9, 2022
• S. 202 (new s. 27.1): Apportionment by type of business — if an SLFI changes category mid-period (e.g., switches from insurer to investment plan rules), its provincial percentage is prorated by days in each category. Retroactive to August 9, 2022
• S. 203: Expands the "look-through" percentage rule to qualifying private investment plans and SLFIs excluded by operation of ss. 11 or 12. Applies to reporting periods ending after August 4, 2023
• Ss. 204–207: Plan merger rules for stratified and non-stratified investment plans — adds new subparagraph (iii) in each case to cover predecessors that are a series of a stratified investment plan (previously only non-stratified plans and series were addressed). Retroactive to August 9, 2022
• S. 208 (new s. 40(a.1)): Surety companies acting under performance bonds on construction contracts can now claim input tax credits for property/services acquired to fulfill their bond obligations. Applies to tax becoming payable after August 15, 2025 (or earlier periods if not already included in net tax)
• S. 209: Narrows the "qualifying investor" definition to exclude qualifying private investment plans (not just qualifying small investment plans). Retroactive to August 9, 2022
• Ss. 210–213: Attribution point rules — plan merger triggers now explicitly include mergers involving a series of an investment plan, not just the plan itself. Retroactive to August 9, 2022
• S. 214 (new s. 66): Investment plan merger rule extended to cover mergers that form a series of an investment plan (not just a whole plan). Retroactive to August 9, 2022

Division 2 — Excise Act, Excise Act, 2001 and Related Regulations (Sections 215–225)

• S. 215: Minister gets a 10-year window to waive or reduce penalties on returns under the Excise Act
• S. 216: Same 10-year waiver authority extended to penalties and interest on amounts payable
• S. 217: Duty imposed on cigars under s. 43 now explicitly excluded from the "sale price" definition
• S. 218: "Administration or enforcement" clarified to include listed international agreements and tax treaties
• S. 219 (new s. 6.1): Negative amounts in algebraic formulas deemed to be zero
• Ss. 220–221: Cannabis products taken for use or unaccounted for are relieved of federal duty before provincial specified duty applies — retroactive to August 12, 2024
• Ss. 222–223: Same relief structure applied to vaping products — retroactive to August 12, 2024
• S. 224: Information requirement authority expanded to include administration of listed international agreements and tax treaties
• S. 225: 3-year licence term cap extended to spirits, wine, user's licences and certain excise warehouse licences
• Ss. 226–227: Raw leaf tobacco packaging rules updated — prescribed package now defined as ≤500g in the smallest consumer-facing package. Comes into force first of the month after royal assent

PART 4 — Various Measures

Division 1 — Financial Institutions: Bearer Instruments (Sections 228–241)

Applies identically across Trust and Loan Companies Act, Bank Act (banks + bank holding companies) and Insurance Companies Act (companies + insurance holding companies):

• No new bearer-form documents evidencing conversion privileges, options or rights to acquire shares
• Existing bearer-form documents must be converted to registered form on holder's request
• Fractional share certificates and scrip certificates restricted to registered form going forward; existing bearer ones must be exchanged on request
• "Fungible securities" provisions updated to reference all applicable Acts and regulations

Division 2 — Financial Institutions: Good Faith Immunity (Sections 242–244)

• Adds identical "no liability" clauses to the Trust and Loan Companies Act (s. 530.1), Bank Act (s. 977.1) and Insurance Companies Act (s. 1020.1)
• No action lies against the Crown, Minister, Commissioner, Superintendent or their staff for anything done or omitted in good faith under these Acts

Division 3 — Bank Act: Non-Discrimination on Deposit Products (Sections 245–246)

• New Part VIII.1 added to the Bank Act
• Banks and authorized foreign banks must not offer or sell another Canadian financial institution's deposit products in a discriminatory manner
• Institutions must not offer their own deposit products through affiliates in a discriminatory manner
• Minister may make regulations defining "non-discriminatory manner"
• Comes into force by order in council

Division 4 — Public Contracts (Sections 247–252)

• S. 247 (Financial Administration Act s. 41): Governor in Council's contract regulation power extended to Crown corporations; CPPIB only subject to those regulations if covered by a trade agreement
• Ss. 248–250 (Dept. of Public Works Act): Procurement complaints regime updated — regulations now define which contracts and subject-matter are reviewable and who may file complaints
• S. 251 (National Capital Act): Subsection 15(3) repealed
• Comes into force by order in council (two separate orders for different provisions)

Division 5 — Tax Court of Canada Act (Sections 253–264)

• Informal procedure monetary thresholds doubled across the board:Amounts in issue: $25,000 → $50,000Loss amounts: $50,000 → $100,000Excise Tax Act disputes: $50,000 → $100,000
• Existing appeals (notice filed on or before commencement) continue under old thresholds
• Maximum Amounts for Informal Procedure Regulations repealed (thresholds now in the Act itself)

Division 6 — Access to Information Act (Section 265)

• Retail Payment Activities Act added to Schedule II of the Access to Information Act, with reference to subsections 62(1) and 63(1)

Division 7 — Outstanding Guarantee and Protected Loan Limits (Sections 266–267)

• National Housing Act s. 15: Mortgage-backed securities guarantee cap raised to $1 trillion plus any additional amounts authorized by Parliament on or after royal assent
• Protection of Residential Mortgage or Hypothecary Insurance Act s. 27: Protected loan aggregate cap raised to $500 billion plus any additional amounts authorized by Parliament on or after royal assent

Division 8 — Bankruptcy and Insolvency Act (Sections 268–270)

• New "reviewable conduct" category (s. 9.1) covering: unlicensed use of "trustee" title, acting as or representing as a licensed trustee, soliciting assignments/proposals/bankruptcy applications, and false/misleading public representations about bankruptcy or insolvency
• Courts (including Federal Court) can order cessation, public notices, restitution and other relief on Superintendent's application
• New offences (s. 202): unlicensed trustee activity — fines up to $1M (corporations) or $100K + 1 year imprisonment (individuals); solicitation offences — same penalties

Division 9 — Canada Labour Code: Non-Compete Clauses (Sections 271–274)

• New Division XI.1 added to the Canada Labour Code
• Prohibition: Employers cannot impose non-compete clauses or other employment-related restrictions on federally regulated employees
• Void: Such clauses are void (or null in Quebec)
• Exemptions: Business sale/transfer scenarios, CEOs, direct CEO reports in specific C-suite roles, and GIC-specified positions
• Anti-reprisal: Employers cannot discipline, demote or disadvantage employees for refusing to agree to or comply with such clauses
• Burden of proof on employer to show a clause is not a non-compete or restriction
• Transitional: Existing clauses in force on commencement day have a 1-year grace period before the void rule applies
• Comes into force by order in council

Division 10 — Canadian Human Rights Act (Sections 275–277)

• Commission composition updated: "Deputy Chief Commissioner" title replaced by a named "Accessibility Commissioner" as a distinct full-time member
• Acting Chief Commissioner defaults to most senior full-time member other than the Accessibility Commissioner (when Chief is absent/incapacitated/vacant)
• Transitional: current Deputy Chief Commissioner deemed appointed as Chief Commissioner for remainder of their term

Division 11 — International Development Research Centre Act (Sections 278–280)

• Board size reduced: maximum other governors cut from 14 to 10
• Canadian citizenship requirement: Chairperson, Vice-chairperson and at least half of other governors must be Canadian citizens
• Qualification requirement: at least 6 governors must have international development or science/technology experience
• Quorum: 6 governors (at least 4 Canadian citizens); majority Canadian citizens required for validity when more than 6 attend

Division 12 — Tobacco and Vaping Products Act (Section 281)

• Mandatory 5-year review cycle begins July 1, 2026, then restarts after each report is tabled
• Report must be tabled in both Houses within 6 months after each 5-year period ends

Division 13 — Pest Control Products Act (Sections 282–285)

• Mandatory re-evaluation cycle replaced with a 15-year assessment trigger: Minister must assess whether health/environmental risks have increased significantly since the last decision or assessment
• Re-evaluation only required if assessment finds significant increase in risks
• Minister may delay assessment if a special review is underway; may narrow re-evaluation scope to exclude aspects covered by the special review
• Minister may terminate a special review if a re-evaluation covering the same aspect is initiated
• All decisions (assessments, delays, terminations) must be made public with reasons
• Transitional: ongoing re-evaluations continue; Minister may initiate an assessment to potentially terminate them if risks have not increased significantly

Division 14 — Territorial Lands Act (Section 286)

• New s. 12.1: Governor in Council can, by order in the national interest, cancel licences/claims/leases in Nunavut, freeze new applications, prohibit transfers, and close lands to prospecting
• Notice required to affected rights holders as soon as feasible
• Minister must determine compensation within 180 days (extendable by 180 days) for cancelled claims, leases and refused lease issuances/renewals
• No other compensation or damages available beyond what the Minister determines
• Orders published in Canada Gazette within 23 days; Statutory Instruments Act does not apply
• GIC may make regulations on implementation and compensation

Division 15 — Red Tape Reduction Act (Sections 287–289)

• Official Languages Act added to the list of excluded Acts (exempt from the one-for-one rule)
• Minor English and French drafting corrections to ss. 12 and 14.2

Division 16 — Defence Investment Agency Act + Defence Production Act (Sections 290–338)

Subdivision A — Defence Investment Agency Act (new Act)

• Establishes the Defence Investment Agency as a standalone entity (spun out from Public Works)
• Minister designated by GIC presides; CEO appointed by GIC for renewable 5-year terms
• Mandate: assist Minister with powers under the new Act and the renamed Defence and National Security Production and Procurement Act
• Minister's powers cover all matters relating to production, procurement and investment in national defence/security not assigned elsewhere
• Minister may make loans, advance payments, guarantees, grants, contributions and acquire shares for defence purposes (s. 15.1)
• Transitional: existing DIA staff, CEO, contracts and appropriations carry over to new agency
• Added to schedules of Access to Information Act, Financial Administration Act, Privacy Act, Public Service Superannuation Act, Public Sector Compensation Act

Subdivision B — Defence Production Act (renamed and substantially expanded)

• Renamed: Defence and National Security Production and Procurement Act
• "Defence supplies" definition expanded to include intangibles, data, animals and national security purposes
• New definitions: "defence services," "acquire" (includes lease), "dispose" (includes consign and lease)
• "Associated government" expanded to include NATO partners in good standing, EU and member states
• "Defence projects" expanded to include national security works and residential communities on DND property
• New competitive procurement rules (ss. 26–29): Minister must conduct competitive process; 13 enumerated exceptions (urgency, national security, sole source, interoperability, sensitive technology, etc.); Minister may exclude persons posing national security risk without giving reasons
• Financial assistance powers (s. 15.1): loans, advance payments, guarantees, grants, contributions, share acquisition
• Consolidated Revenue Fund spending cap: $1 billion (amendable by appropriation Act)
• Administrative monetary penalties scheme: max $2 million per violation
• 3-year review by Minister after commencement
• Comes into force by order(s) in council

Division 17 — Canada Transportation Act: Air Passenger Rights (Sections 339–364)

• Complaint process overhauled: Minister (not Agency) now handles tariff complaints; 30-day decision deadline for carriers; 90-day deadline for Minister to issue order after failed mediation
• Alternative resolution stream (ss. 85.18–85.29): GIC can suspend the standard process and redirect complaints to designated private persons; carriers must contract with a designated person within 90 days; decisions binding; 30-day payment deadline; enforcement via Federal Court orders
• Backlog clearance (ss. 355–362): GIC can suspend standard process for pre-existing unfiled complaints; Minister or Agency may contract with a person to resolve the backlog; same binding/enforcement rules apply
• Penalties: Violations of payment, reporting and agreement obligations — up to $1 million per violation for corporations
• Air passenger regulations (s. 86.11): Regulations that apply to a complaint are those in force on the date of ticket purchase (not date of complaint)
• Penalty cap for air passenger regulation violations: Up to $1 million for corporations (up from $25,000)
• Coordinating amendments with Budget Implementation Act, 2023, No. 1 for prior decisions and publication rules
• Comes into force by order(s) in council

WHO GAINS POWER

• The Minister can file a tax return on behalf of eligible lower-income individuals without their explicit consent — deemed filed unless the individual corrects it within 90 days
• Cabinet (Governor in Council) can suspend international tax treaties by order — no Parliamentary vote required (Canada-Russia treaty suspended November 18, 2024)
• Cabinet can cancel mining licences, claims and leases in Nunavut by order "in the national interest" — affected rights holders have no appeal beyond the Minister's compensation determination
• The Minister can exclude any person from defence procurement on national security grounds without giving reasons
• Cabinet can redirect all air passenger tariff complaints away from the Canadian Transportation Agency to private designated persons — bypassing the Agency entirely
• The Minister gains authority to file tax returns on behalf of Canadians and to designate private complaint resolvers for air travel disputes
• Multinational corporations subject to Canada's new UTPR are now liable to Canadian tax on profits undertaxed in other countries — Canada collects on behalf of the global minimum tax framework
• Federally regulated employees gain protection from non-compete clauses — existing clauses void after a 1-year grace period

WHO LOSES POWER

• Individual Canadians — the Minister can file your tax return on your behalf; you have 90 days to correct it or it stands as filed
• Parliament — treaty suspensions, Nunavut land cancellations and air complaint redirection all happen by Cabinet order, not by vote
• Air passengers — complaints can be redirected to private resolvers contracted and paid by the carriers they are complaining against
• Mining rights holders in Nunavut — licences, claims and leases can be cancelled by Cabinet order with no right of appeal; compensation is the Minister's determination only
• Employers of federally regulated workers lose the ability to enforce non-compete clauses, including existing ones after the grace period

WHO GAINS MONEY

• Lower-income Canadians who haven't filed returns may receive automatic federal benefits through Minister-filed returns
• Tradespeople — Labour Mobility Deduction annual limit increased; distance threshold reduced to 120 km, making more workers eligible
• Greenhouse operators — 100% immediate expensing for eligible greenhouse buildings, phasing down after 2029
• Home buyers — Home Buyers' Plan RRSP repayment grace period extended to 2032
• Surety companies on construction performance bonds — now eligible for input tax credits on property and services acquired to fulfill bond obligations
• Clean hydrogen producers using methane pyrolysis — now eligible for the clean hydrogen investment tax credit
• Air passengers — carriers must pay compensation or refunds within 30 days of a decision; penalties up to $1 million per violation for non-compliance
• Federally regulated employees — non-compete clauses void; cannot be disciplined for refusing to sign one

WHO LOSES MONEY

• Large multinationals with Canadian subsidiaries — now subject to UTPR top-up tax on group profits undertaxed in other jurisdictions
• Crypto-asset service providers — new mandatory information reporting requirements add compliance costs
• Airlines — penalty cap for air passenger regulation violations raised to $1 million per violation (up from $25,000)
• Unlicensed insolvency operators — new fines up to $1 million (corporations) or $100,000 + 1 year imprisonment (individuals)
• Nunavut mining rights holders — compensation only; no damages available for cancelled licences or leases
• Canadians who claimed CCR — no payments on returns or adjustment requests filed after October 30, 2026

THE CATCH

• ⚠️ The Minister can file your tax return without your consent — it is deemed filed unless you correct it within 90 days; any errors from your failure to notify the Minister count as misrepresentations made by you
• ⚠️ Air complaint designated persons are contracted by the carriers — the airline selects and pays the private resolver handling complaints against itself; there is no requirement for independence
• ⚠️ Nunavut land cancellations have no appeal — the Minister's compensation determination is the only remedy available; no damages, no court challenge on the merits
• ⚠️ The Canada-Russia tax treaty is "suspended" not terminated — Cabinet can reinstate it at any time without a Parliamentary vote
• ⚠️ The Canada Carbon Rebate was ended by administrative deadline, not by repeal — Parliament never voted to eliminate the benefit; it was wound down by setting a cutoff date after which no payments will be made
• ⚠️ "Non-discriminatory manner" for deposit products is not defined in the Bill — the Minister defines it by regulation and can change the definition without a vote
• ⚠️ Defence procurement exclusions require no reasons — the Minister can bar any person from competing for defence contracts on national security grounds without explanation or appeal
• ⚠️ The $1 billion Consolidated Revenue Fund cap for defence spending is amendable by appropriation Act — Parliament can raise it without standalone legislation