Federal Budget 2026 introduces several measures relevant to employers managing cross-border and mobile workforces. While Canada’s tax rules applicable to cross-border employees remain largely unchanged, the Budget proposes changes affecting immigration and workforce planning, individual filing deadlines, foreign asset reporting, tax instalments, tax dispute timelines, employee relocation and non-resident property dispositions. Broader business investment incentives may also influence where Canadian businesses invest, expand and deploy talent. Most measures remain subject to legislative approval, and may be amended before implementation, while certain measures take effect immediately as of the Budget announcement..
Budget measure: The 2027–2029 Immigration Levels Plan targets approximately 380,000 permanent resident admissions and 370,000 new temporary resident arrivals annually, while continuing to prioritize economic immigration and skills needed in the Canadian economy. The Budget also proposes opportunities for up to 200,000 temporary residents to transition to permanent residence by the end of 2027, including through Express Entry and Provincial Nominee Programs.
Mobility impact: Employers should expect temporary resident intake to remain controlled, making earlier workforce and immigration planning increasingly important. Organizations should identify critical-skill employees, upcoming permit expiries and potential permanent residence candidates sooner, while monitoring new pathways for temporary workers already working in Canada. For employers relying heavily on international talent, immigration strategy should increasingly form part of longer-term workforce planning rather than being addressed only when an assignment or transfer arises.
Budget measure: The Budget proposes to amend the Prohibition on the Purchase of Residential Property by Non-Canadians Act to extend the restriction by two years, until January 1, 2029. However, the proposed amendments would exempt newly constructed residential properties from the prohibition. The existing exemptions for certain foreign nationals would also remain in place.
Mobility impact: The proposed extension of Canada’s foreign buyer ban has implications for foreign nationals relocating to Canada on temporary work assignments or permanent transfers. Although the exemption for newly constructed homes provides some additional flexibility, foreign national employees should carefully consider their immigration status, work permit expiry dates and potential pathways to permanent residency when planning a home purchase in Canada.
Budget measure: The previously announced Productivity Mega Deduction would allow businesses to immediately deduct the full cost of a broader range of qualifying capital investments, rather than deducting those costs over the normal depreciation period. The government estimates that the measure will reduce Canada’s marginal effective tax rate on new business investment from 13% to 6.4%.
Mobility impact: Although not an employee tax measure, the incentive could influence where businesses establish facilities, expand operations and deliver major projects. New Canadian investment may create demand for specialized talent, international transfers and project-based deployments. Mobility and HR teams should therefore be included early in investment planning to assess talent availability, work authorization, corporate tax and permanent establishment considerations and the appropriate assignment or transfer model. The proposed rules also increase the personal deduction to 100% of qualifying renounced Canadian Development Expenses for employees making such investments.
Budget measure: Beginning with the 2027 tax year, the Budget proposes a common May 15 filing and balance-due date for individuals. This extends the current April 30 deadline by 15 days for most individuals, while shortening the filing period for self-employed individuals and their spouses, who currently have until June 15.
Mobility impact: The additional time should be particularly helpful for mobile employees whose Canadian returns depend on foreign tax returns, foreign tax slips, foreign tax credit information or trailing compensation. This could reduce estimates, protective positions, and subsequent amendments where foreign information is not available by April 30. Employers and mobility programs may consider adjusting tax equalization and settlement timelines, particularly where Canadian balances are employer-funded.
We are awaiting confirmation from Revenu Québec as to whether Québec will harmonize its filing deadline with the new federal deadline.
Budget measure: For taxation years or fiscal periods ending after 2026, the T1135 filing threshold would increase from $100,000 to $200,000 of specified foreign property, while the threshold for simplified reporting would increase from less than $250,000 to less than $500,000.
Mobility impact: This should provide meaningful compliance relief for inbound employees who retain foreign investments and financial accounts after moving to Canada. Fewer employees will have a T1135 filing requirement and more will qualify for simplified reporting. Importantly, the change does not eliminate the requirement to report the underlying foreign income on the Canadian tax return.
Budget measure: Beginning in 2028, the net tax owing threshold that triggers instalments would increase from $3,000 to $7,500, and from $1,800 to $4,500 for Quebec residents.
Mobility impact: Fewer mobile employees with relatively small residual Canadian liabilities would be required to make tax installments. For tax-equalized populations, this could also reduce the number of small quarterly payments employers need to fund and administer. Larger liabilities arising from bonuses, equity compensation, foreign income or trailing compensation will continue to require proactive payroll and tax funding.
Budget measure: Budget 2026 proposes extending the general Notice of Objection deadline from 90 days to one year after the notice of assessment is sent. Individuals and certain estates would receive additional protection based on their filing due date. The change would eliminate the current extension-of-time process, meaning taxpayers would receive a longer initial objection period but would generally not have a further extension available.
Mobility impact: The longer initial period should provide more time to obtain foreign tax returns, payment confirmations and other documentation needed to resolve assessments involving foreign tax credits, foreign-source income, residency or treaty positions. However, employers and employees should not treat the extended deadline as open-ended, since the current ability to request a further extension would generally be removed. It should also be noted that the Budget proposes measures for tax debts to be shared with third party credit agencies, which was previously not possible, but any liability under objection will not be shared with the credit agencies.
Budget proposal: Budget 2026 proposes a wide range of flat rate credits and deductions, with several changes to deductions associated with employee mobility, including an optional $1,000 moving-expense deduction, a $1,500 flat labour mobility deduction for qualifying construction tradespeople and apprentices, and enhancements to the Northern Residents Deductions.
Mobility impact: The measures could simplify compliance for smaller relocations and provide additional relief for employees deployed to project and remote locations. For larger employer-sponsored international moves, employer payment or reimbursement of actual moving expenses will generally remain more tax-efficient than the $1,000 flat amount. Employers with northern or project-based populations should also revisit how the changes interact with the special work site exemption, employer-provided accommodation, travel allowances and payroll reporting.
Budget measure: Beginning January 1, 2027, the Budget proposes reducing section 116 withholding for corporate transactions from 25% to 15% for certain capital property and from 50% to 30% for depreciable taxable Canadian property.
Mobility impact: The lower withholding rates may not apply to the majority of mobile employees who generally own relevant assets directly, rather than via a corporation, so there may be no significant change in this regard and the application of the existing rules will be an important consideration for non-resident of Canada, selling relevant assets.
Budget measure: The Budget proposes restricting certain tax-deferred trust distributions where the recipient corporation or partnership has direct or indirect non-resident ownership.
Mobility impact: Although a more specialized measure, this could affect internationally mobile executives, private business owners and families with Canadian trusts when an individual becomes non-resident. Trust and corporate structures should therefore be reviewed as part of pre-departure Canadian tax planning, rather than after the individual has relocated.
Budget measure: The Budget introduces a new Canada Growth Incentive (CGI) providing qualifying Canadian-resident individuals with a capital gains exemption of up to $15 million per qualifying business on qualifying share dispositions. The CGI would apply to eligible shares issued from Budget Day through 2036 and would interact with existing Income Tax Act provisions, including the lifetime capital gains exemption and alternative minimum tax.
Mobility impact: The Canada Growth Incentive (CGI) creates an important new planning consideration for executives, founders and employees who hold qualifying shares and may undertake international assignments. Disposition events and departure tax implications should be considered when planning international assignments.
Budget measure: The budget proposes to increase fixed penalties for a number of non-compliance situations. This increase reflects that the current penalty level may have been set some decades earlier, with the increase intended to reflect inflationary adjustments.
Mobility impact: The increased penalties may apply to certain aspects of employer and employee compliance, and in the case of non-compliance, particularly repeated noncompliance, may increase overall costs for employers and employees. The proposals generally increase employer penalties, and in some cases the increases reflect a threefold increase from the current penalty level, with amounts being updated every five years based on the CPI index.
Budget 2026 does not appear to fundamentally alter Canada’s core rules governing tax residence, treaty residence, foreign tax credits, departure tax, payroll withholding, shadow payroll or the sourcing of employment and equity compensation. For most mobility programs, the Budget therefore calls for targeted process and policy updates, rather than a fundamental redesign of existing assignment structures or tax approaches.
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Joey Paiva
Partner, Calgary
Dan Trinh
Partner, Vancouver
Alex Legg
Director, Calgary
Theo Ciju
Director, Toronto
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