Carbon Tax Rebate – what you need to know

The Canadian carbon tax rebate aims to provide financial relief to eligible businesses by helping offset the costs associated with the federal fuel charge.

How Does the Carbon Tax Rebate Work?
The rebate will be automatically issued to eligible Canadian-controlled private corporations (CCPCs).

To qualify, a business must be a CCPC throughout the tax year and employ 499 or fewer employees across Canada. The corporate income tax return for the 2023 tax year must have been filed by July 15, 2024*, for the business to be eligible for retroactive payments. Additionally, businesses must employ at least one person in a designated province during the fuel charge year.

There’s no separate application process required. The Canada Revenue Agency (CRA) will calculate and distribute the rebate based on the number of employees and the applicable payment rates for each province.

How is Eligibility Determined?
Several factors are considered when determining eligibility for the rebate. Only CCPCs qualify, so sole proprietorships and partnerships are not eligible. The rebate amount is based on the number of employees, including full-time, part-time, and seasonal workers. The calculation will rely on the number of T4 slips issued in the relevant calendar year. If your business has subsidiaries, each subsidiary with 499 or fewer employees is eligible for the rebate independently.

Even if the parent company has more than 500 employees in total, the subsidiaries may still be eligible if they individually meet the employee count and other criteria.

Eligibility for Businesses in BC and Quebec
Although BC and Quebec have their own provincial carbon pricing systems, businesses in these regions may still qualify for the federal carbon rebate, providing they meet the eligibility requirements, including having 499 or fewer employees and operating in a designated province.

Employee Turnover and Rebate Calculation
If your business experiences high turnover, with multiple employees hired for the same role within a year, each T4 issued counts as a separate employee. This could result in a higher employee count and potentially increase the rebate amount. However, if the employee count exceeds 499 due to turnover, it may impact your eligibility for the rebate.

Use of Previous T2 and T4 Submissions
The CRA will use previous T2 corporate income tax returns and T4 slips to assess eligibility and calculate the rebate. Make sure all your tax filings are accurate and up to date, as these documents are crucial in determining your rebate amount.

When Will Payments Be Issued?
Rebate payments will be issued by the end of the year. Once payments are ready, they will be deposited directly into the bank accounts of businesses that are set up for direct deposit with the CRA, or if your business isn’t set up for direct deposit, the rebate will be issued by cheque.