In spring 2024, the Canadian federal government proposed an increase to the Capital Gains Inclusion Rate, raising it from 50% to 66.67%. The change was scheduled to take effect on June 25, 2024, and would have applied to capital gains over CAD 250,000 for individuals. Corporations and trusts were expected to pay the higher rate on all capital gains.
Background
For German corporations and individuals holding Canadian assets — such as real estate or assets in Canadian corporations — the proposed increase would have significantly raised their Canadian tax burden. Many taxpayers with assets disposed after June 24, 2024, filed their tax returns based on the anticipated higher inclusion rate.
The Canada Revenue Agency (CRA) had already begun to implement the measure and issued assessments applying the increased rate.
Reversal of the Inclusion Rate Increase
In late 2024, the Canadian government deferred the implementation to January 2026, and has since reversed the decision. Prime Minister Mark Carney confirmed in March 2025 that the higher inclusion rate would not proceed. As a result:
- The Inclusion Rate remains at 50%.
- The increase will not apply retroactively.
As a result, already assessed taxpayers may have been overtaxed.
Impact on Germans with Canadian Assets
This policy reversal ultimately raises questions for German corporations and individuals with Canadian real estate or corporate asset sales on or after June 25, 2024:
- Was the tax return filed using the higher inclusion rate?
- Has the CRA already issued a notice of assessment based on the now-reversed rate?
- Was too much tax paid, and is a refund available?
This may be particularly relevant in high-gain property sales or corporate exits, where the difference in taxation could be substantial.
Recommendation
Taxpayers with capital gains from the sale of Canadian real estate or assets in Canadian corporations on or after June 25, 2024, should review any related Canadian tax filings and assessments in light of the recent policy reversal.
Where applicable, taxpayers may wish to file an adjustment request (T1 Adjustment for individuals or T2 Adjustment for corporations) in order to recover excess tax paid.
JACOB LAW can assist with:
- Evaluating how the policy change affects individual cases
- Coordinating with Canadian tax advisors
- Preparing and submitting formal adjustment requests to the CRA
Acting promptly is recommended, as adjustment periods are limited.
Disclaimer: This information is provided for general guidance only and does not constitute legal or tax advice. Jacob Law supports German-speaking clients with Canadian assets in all cross-border legal and tax matters.
