FAQs on Budget 2025 and the future of Employee Ownership Trusts (EOTs) in Canada

What did the government say about EOTs in Budget 2025?

Budget 2025 had no new news about the expiry of the EOT tax exemption. However, the Budget confirmed that it intends to move forward with the draft legislation it tabled in August which clarifies who qualifies for the tax incentive. Employee Ownership Canada was active over the summer in advocating for these clarifying amendments, and they resolve many of the concerns we heard about from the advisory community.

Did the budget change Employee Ownership Trust (EOT) rules?

No. The core EOT framework remains in effect, and business owners can continue to use this structure for succession planning.

What happens to the $10 million capital gains exemption?

The exemption is still in effect until December 31, 2026 as originally legislated. Budget 2025 did not extend the exemption or make it permanent, which means that the clock continues to run on the current timeline. Employee Ownership Canada will continue to work with government toward making this incentive permanent, so more business owners can confidently plan EOT transitions.

Can business owners still proceed with an EOT?

Yes. The EOT framework remains in place, and the August 2025 updates are improvements that make EOTs a more practical and adoptable option for succession planning. Our advocacy has already led to positive progress, and we’ll keep working to make these measures even more beneficial, by encouraging a permanent  tax exemption.

Why does the capital gains exemption matter?

The exemption reduces or eliminates capital gains tax for owners who sell their business through an EOT, making EOT transitions more financially attractive and accessible. The exemption helps offset the fact that, under most EOT structures, owners provide seller financing and receive payment over several years. In this way, the exemption compensates business owners for waiting to receive their full payout.

Is there still a possibility that the exemption could be extended or become permanent?

Yes. Cross-party support, strong community momentum, proven EOT success in the UK, and alignment with economic development goals mean permanence remains very possible. EOC is continuing advocacy and education efforts and actively engaging government decision-makers to secure the exemption before it expires.

What can business owners and advisors do now?

• Accelerate EOT transition planning to meet the December 2026 expiry deadline.
• Explore phased or hybrid transitions that make use of the current EOT framework.
• Stay informed through EOC’s upcoming webinars, newsletters, and updated resources.
• Support our advocacy efforts by sharing your experiences and helping demonstrate the positive impact of employee ownership on Canada’s economy.

What will Employee Ownership Canada do next?

We’ll continue to advocate, educate, and promote employee ownership across the country and are actively working on a renewed website, regular newsletters, member programming, speaking opportunities, and webinar training. Our focus remains clear: building awareness of the economic and social benefits of employee ownership and securing the long-term policies needed for it to thrive.

Click here to read Employee Ownership Canada’s statement on the 2025 Budget.