The delay in implementing the capital gains inclusion rate increase until January 1, 2026, has triggered a series of relief measures by the Canada Revenue Agency (CRA).
These measures aim to mitigate uncertainty for taxpayers and tax professionals during this transitional period.
CRA Relief Announcements
Extension of Filing Deadlines and Penalty Relief
On January 31, 2025, the CRA announced temporary relief for late-filing penalties and interest charges for certain taxpayers. Specifically, the relief applies to impacted T1 Individual filers and impacted T3 Trust filers, providing additional time to meet tax filing obligations.
- For T1 filers, the penalty and interest relief extends until June 2, 2025.
- For T3 filers, the relief applies until May 1, 2025.
This relief is designed to allow taxpayers, particularly those reporting capital gains, extra time to file their returns and avoid penalties.
Penalty Relief for Information Returns
On February 19, 2025, the CRA introduced further penalty waivers for certain information slips. This applies to T4, T4A, and T5 slips with a filing deadline of February 28, 2025. These will now be accepted without penalty if filed by March 7, 2025.
Similarly:
- T4PS and T5008 slips will be granted penalty relief if filed by March 17, 2025.
- T3 slips for impacted T3 Trust filers can be filed by May 1, 2025, without penalties.
However, the CRA warns that if returns are submitted after the extended period, penalties will be calculated based on the original filing deadlines.
Clarifications and Ongoing Questions
The CPA Canada has sought additional clarity from the CRA regarding the specifics of the penalty relief, especially for T1 filers. For instance, it is unclear whether a spouse of an impacted T1 filer, who has no capital gains to report, is also considered an impacted filer.
Additionally, it remains unclear whether the deadline extension applies to other prescribed forms associated with a T1/T3 filing, such as T1135.
Moreover, the CRA confirmed that the previously announced penalty relief for corporations is no longer applicable.
Since the capital gains rate change is now set for January 1, 2026, and the related T2 forms will remain unchanged, corporations are not entitled to penalty or interest relief for filings due on or before March 3, 2025.
Filing Deadlines and Tax Information Slips
Tax Returns
| Tax Return | Normal Due Date | Relief Period |
|---|---|---|
| T1 Income Tax Return | April 30, 2025 (or June 16, 2025 for business owners) | Relief for impacted T1 filers if filed by June 2, 2025 |
| T2 Income Tax Return | Six months after year-end | No further relief for corporations as previously announced |
| T3 Income Tax Return | 90 days after year-end | Relief for impacted T3 Trust filers if filed by May 1, 2025 |
Information Returns
| Information Return | Normal Due Date | Relief Period |
|---|---|---|
| T3 Information Slips | 90 days after year-end | No penalty if filed by May 1, 2025 |
| T4, T4A, T5 Information Slips | February 28, 2025 | No penalty if filed by March 7, 2025 |
| T4PS, T5008 Information Slips | February 28, 2025 | No penalty if filed by March 17, 2025 |
The CRA’s penalty relief measures provide a much-needed reprieve for those affected by the delay in the capital gains inclusion rate change.
Taxpayers, especially individuals and trusts reporting capital gains, have extended deadlines for filing their returns and information slips without incurring late-filing penalties or interest.
However, it’s important for taxpayers and professionals to remain mindful of the specific deadlines and continue monitoring updates from the CRA to ensure compliance.
FAQs
What does “impacted T1 Individual filers” mean?
“Impacted T1 Individual filers” refers to individuals who are reporting capital gains affected by the delay in the capital gains inclusion rate change.
Are spouses of impacted T1 filers also eligible for penalty relief?
It remains unclear whether spouses of impacted T1 filers with no capital gains to report will qualify for relief. CPA Canada has requested clarification from the CRA.
Does the penalty relief for corporations still apply?
No, the penalty relief for corporations no longer applies. Since the capital gains rate change is delayed until January 1, 2026, the T2 forms remain unchanged, and no relief is provided.
What are the new deadlines for filing T3 and information slips?
For T3 trust filers, the deadline for filing without penalties is extended to May 1, 2025. For other information returns like T4, T4A, and T5 slips, the deadline has been extended to March 7, 2025.