Canada’s Budget 2025: What all businesses should know about the federal budget

This week, Parliament passed Budget 2025. Initially presented to the House of Commons last November 4, the federal budget, entitled “Canada Strong”, plans to stimulate growth and productivity despite trade uncertainty and a moderate economic slowdown.

This year, we’re seeing a shift in strategy through investments in housing, infrastructure, defense, and productivity enhancement, while reducing spending over the next five years.

While there are no proposed changes to the general personal or corporate income tax rates, capital gains inclusion rates, or other broad tax measures, Budget 2025 includes targeted updates that could meaningfully impact innovation and business operations.

Instead of making you go through the whole 406-page document, we thought it’d be better if we summarized it for you.

Here are the highlights of Canada’s federal budget and what it could mean for your business.

Scientific Research and Experimental Development (SR&ED)

For taxation years beginning after December 15, 2024, there will be an increase in the annual SR&ED expenditure limit, wherein certain corporations are entitled to earn an enhanced 35% refundable investment tax credit (ITC), up to $6 million.

For more information, we have gone over the SR&ED changes extensively in our other blog post.

Productivity Super-Deduction

This set of enhanced tax incentives covers all new capital investment that will allow businesses to write off a larger share of the cost of these investments. This measure is designed to encourage investment and boost productivity. Here’s how you can benefit from it:

Temporary Immediate Expensing for Manufacturing Buildings:

• For the first year, eligible businesses may deduct 100% of the cost of qualifying buildings acquired on or after November 4, 2025, and used before 2030, provided that 90% of the building’s floor space is dedicated to manufacturing or processing.
• The deduction, however, will be gradually phased down. 75% for property first used in 2030 or 2031, and 55% for property first used in 2032 or 2033. No enhanced allowance will be available after 2033.

Reinstated Accelerated Investment Incentive:

• Enhanced first-year write-offs for most capital assets.
• Includes manufacturing machinery and equipment, clean energy generation, zero-emission vehicles, patents, data network infrastructure, and computers.
• Previously set to expire in 2027, now extended.

Enhanced Write-Offs for Low Carbon LNG Facilities

• Budget 2025 reintroduced accelerated carbon cost allowances (CCA) incentives to liquefied natural gas (LNG) buildings and equipment, which previously expired in 2024.
• Under this measure, accelerated depreciation rates will depend on the emissions performance of the facility. However, eligibility requires meeting specified low-emission standards.

Build Communities Strong Fund

In an effort to revitalise local infrastructure, the Build Communities Strong Fund invests $51 billion over 10 years, followed by $3 billion per year ongoing. This program comes in three streams:

Provincial and Territorial Stream ($17.2 billion):

• This stream supports housing-enabling infrastructure, health infrastructure ($5 billion dedicated over three years for hospitals, emergency rooms, urgent care centres, and medical schools), infrastructure for colleges and universities, and water and wastewater facilities.
• Access to this stream requires provincial cost-matching and commitments to reduce development charges.

Direct Delivery Stream ($6 billion over 10 years):

• Supports regionally significant projects, large building retrofits, climate adaptation infrastructure, community infrastructure, and clean-energy generation and storage projects.
• For this stream, proponents must seek private investment (including via Canada Infrastructure Bank financing) before applying.

Community Stream ($27.8 billion):

• Rebrand of the existing Canada Community-Building Fund.
• Provides funding for local roads, bridges, water systems, and community centres.

Strategic Response Fund

The Strategic Response Fund (SRF) is replacing the Strategic Innovation Fund (SIF) to further help Canadian industries innovate and compete on a global-scale.

The SIF, which has been supporting large-scale projects across innovative industries in the country, has been revamped to focus on strategic sectors exposed to risks arising from U.S. tariffs and global trade risks. It will prioritize sectors like steel, automotive, aluminum, lumber, canola, etc.

Funding Details:

• Minimum project request: $10 million for projects with at least $20 million in total costs.
• Flexible funding for early-stage activities, including pre-development work and engineering design studies.

Eligible Applicants:

• For-profit businesses
• Not-for-profits
• Academia or research networks

Regional Tariff Response Initiative

The Regional Tariff Response Initiative (RTRI) was originally launched in March 2025  to provide targeted support for small and medium-sized enterprises affected by tariffs. 

In September 2025, the fund was expanded to $1 billion for over three years. This expansion added eligibility for all sectors (not just the targeted industries) and non-repayable funding of up to $1 million per business.

Here are the eligible activities under the RTRI:

• Digitization, automation, and technology integration
• Market development and expansion activities
• Supply chain optimization
• Standards compliance for market access
• Domestic supply chain strengthening
• Reshoring or onshoring production
• Business support and guidance services

Critical Minerals Sovereign Fund

Under Budget 2025, Canada will establish a $2 billion Critical Minerals Sovereign Fund to increase investment in key mining projects. The fund will be used to make equity investments, provide loan guarantees, and enter into offtake agreements for eligible critical minerals projects and companies over the next five years. The government will also allocate $50 million over the next five years to support the fund’s delivery.

Further, under this fund, we can expect:

• First and Last Mile Fund which absorbs the existing $1.5 billion Critical Minerals Infrastructure Fund. It will be allocated $372 million over four years to support near-term critical minerals projects into production.
• Exploration Tax Credit Expansion where twelve additional critical minerals added to the list, including tin, tungsten, and chromium.
• Processing and Technology Support which provides $585 million over four years for critical minerals projects through the Climate Competitiveness Strategy.
• Joint Investments and Stockpiling with $443 million over five years to support processing technologies, joint investments with allies, and strategic stockpiling.

Build Canada Homes

Launched in September 2025, Build Canada Homes is a new federal agency focused on accelerating affordable housing development. Budget 2025 builds on this momentum with additional measures.

The initial priorities for this measure includes:

• 4,000 affordable mixed-income housing units in major cities (Dartmouth, Longueuil, Ottawa, Toronto, Winnipeg, Edmonton)
• $1.5 billion Canada Rental Protection Fund to help community housing providers acquire private rental buildings
• $1 billion for transitional and supportive housing in partnership with provincial, territorial, municipal, and Indigenous partners
• 700 public, affordable, and supportive housing units in partnership with Nunavut Housing Corporation

Clean Economy Investment Tax Credits

Five major clean economy investment tax credits are getting an enhancement under Budget 2025. These are the:

1. Clean Electricity Investment Tax Credit
2. Carbon Capture, Utilization, and Storage (CCUS) ITC
3. Clean Technology Manufacturing ITC
4. Clean Hydrogen ITC
5. Clean Technology ITC

Arctic Infrastructure Fund

$1 billion worth of funding is expected to be given to the Arctic Infrastructure Fund over the next four years. This will be invested in major transportation projects in the North, including but not limited to airports, seaports, all-season roads, highways, and dual-use infrastructure for both civilian and military applications.

The fund recognizes that Inuit, First Nations, and other communities are best placed to identify community needs, so additional investments like the $41.7 million over four years to Canadian Northern Economic Development Agency is aimed at speeding up the regulatory processes in the North by improving consultation with Indigenous governments and northern communities.

Youth Employment and Skills Programs

With youth unemployment stubbornly remaining at 14.7%, Budget 2025 aims to tackle the issue by investing nearly $1.6 billion over the next three years.

Some programs that will benefit from this are:

• Canada Summer Jobs: $594.7 million over two years starting in 2026-27 to support approximately 100,000 summer jobs.
• Student Work Placement Program: $635.2 million over three years starting in 2026-27 for approximately 55,000 work-integrated learning opportunities for post-secondary students.
• Youth Employment and Skills Strategy: $307.9 million over two years for employment, training, and wraparound support (mentorship, transportation, mental health counselling) for approximately 20,000 youth facing employment barriers annually.
• Youth Climate Corps: $40 million over two years starting in 2026-27 to create a new program providing paid skills training for young Canadians to respond to climate emergencies.
• Union Training and Innovation Program: $75 million over three years to expand union-based apprenticeship training in Red Seal trades.

Venture and Growth Capital Catalyst Initiative

The federal budget further announces $1 billion over three years beginning in 2026-27, delivered through the Business Development Bank of Canada, to leverage pension and institutional investors while supporting emerging fund managers and priority sectors like life sciences.

An additional $750 million is earmarked to address early-stage funding gaps, with strategy details to be determined.

Intellectual Property Support Programs

To ensure that the country’s innovation ecosystem is well-equipped to protect Canadian intellectual property, IP support programs like the ones below will get enhancements under the federal budget.

• Elevate IP Program Extension: $84.4 million over four years to ISED to extend this program supporting SMEs in commercializing and leveraging their intellectual property.
• Patent Collective: $22.5 million over three years to renew support for the Innovation Asset Collective's Patent Collective.
• IP Assist Program: $75 million over three years to the National Research Council to extend this program.
• IP Performance Review: The government will conduct a review to identify new ways to partner with IP-heavy companies, help them commercialize in Canada, and defend their ideas in foreign markets.

What this means for your business

With tons of upcoming new funding, knowing how you can access these changes is key. Whether you're conducting research and development, investing in manufacturing infrastructure, responding to tariff pressures, or developing critical minerals projects, there is something in Budget 2025 for you.

To take full advantage, understanding the specific programs and what’s available is critical. With grants, tax breaks, and partnership opportunities designed to boost innovation and stimulate growth, aligning your strategy with these initiatives can open doors to valuable financial access.

Luckily, our team has gone through the whole document to ensure that we understand how to help you.

Our expert consultants are available to guide you through these opportunities. Reach out to one of our experts to make sure you’re not leaving money on the table.

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