Retroactive Carbon Rebate payments coming to small businesses

Eligible small businesses that filed their 2023 tax return between July 16 and December 31, 2024 can expect a retroactive Canada Carbon Rebate payment in fall 2026, and the payment is tax-free.

This article explains when the retroactive payments are expected, whether they’re taxable, and what to do if the rebate was reported as income.

What was the Canada Carbon Rebate for Small Businesses?
When will my retroactive payment arrive?
Is the rebate taxable?
Will the CRA fix this automatically?

What was the Canada Carbon Rebate for Small Businesses?

The Canada Carbon Rebate for Small Businesses returned a portion of federal fuel charge proceeds directly to eligible Canadian-controlled private corporations (CCPCs), including small businesses in Alberta where the federal fuel charge applied. Businesses in British Columbia weren’t covered, though a corporation based there may still qualify if it employed someone in a province where the fuel charge applied. The rebate covered fuel charge years from 2019-20 through 2024-25 and was paid automatically — businesses didn’t need to apply. Legislation passed in March 2026 confirmed the Canada Carbon Rebate for Small Businesses is tax-free for every fuel charge year it covered.

When will my retroactive payment arrive?

The CRA has issued payments to most eligible small businesses already. Businesses that filed their 2023 tax return after July 15, 2024, and on or before December 31, 2024, will receive a retroactive payment covering the 2019-20 through 2023-24 fuel charge years — and the CRA expects those to arrive in fall 2026. The CRA hasn’t published an exact date, so payments may arrive at different times. No application is needed.

Is the rebate taxable?

No. The Government of Canada passed legislation on March 26, 2026 confirming the rebate is tax-free for all fuel charge years, from 2019-20 through 2024-25, including the retroactive payments. If your small business reported the rebate as taxable income, that amount may need to be removed from your return.

Will the CRA fix this automatically?

In most cases, yes. The CRA is proactively reviewing T2 Corporation Income Tax Returns to find small businesses that reported the rebate as income. What happens next depends on whether your T2 return was filed before or after June 30, 2025 — the date the government committed to making the rebate tax-free — and how the rebate was reported.

*Businesses in the last row can submit a request for a reassessment directly with the CRA.

Questions?

If you have any questions about this article, need help reviewing how the Canada Carbon Rebate was reported on your corporate return, or just want to know more about the services we offer, please contact one of our Tax Experts or complete the contact form below.