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Carbon Tax Rebate for farmers


The federal government's 2021 fall economic update on Dec. 14 proposed to return fuel charge proceeds directly to farming businesses in backstop jurisdictions (that is, provinces that do not meet the federal stringency requirements—currently Ontario, Manitoba, Saskatchewan, and Alberta) through a refundable tax credit, starting with the 2021-2022 fuel charge year. This measure recognizes that many farmers use natural gas and propane in their operations.

Eligible farming businesses

The return of fuel charge proceeds would be available to corporations, individuals, partnerships, and trusts that:

  • Are actively engaged in either the management or day-to-day activities or earning income from farming (e.g., raising animals and harvesting plants in a controlled environment)
  • Incur farming expenses of $25,000 or more that are attributable to backstop jurisdictions

Credit amount

The refundable credit amount will be determined by multiplying a payment rate as specified by the Minister of Finance and will be claimed in income tax returns.

The payment rate is set at $1.47 for 2021 and $1.73 for 2022, per $1,000 in eligible farming expenses, for the fuel charge year. Any credit claimed would be required to be included in taxable income.

Eligible farming expenses

The total farming expenses must be at least $25,000 to be eligible. Eligible farming expenses for this credit are those amounts deducted in calculating income from farming for income tax purposes, excluding any deductions arising from mandatory and optional inventory adjustments and transactions with non-arm's length parties.

Eligible farming expenses must also be attributable to one or more backstop jurisdictions. For businesses operating in multiple jurisdictions, eligible farming expenses would be apportioned by jurisdiction.

How BDO can help

Our BDO tax professionals understand the uncertainty and challenges your business is facing. We can help you assess how this proposal will affect your farming business and provide guidance in determining your next steps.

The information in this publication is current as of January 13, 2022.

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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