The Government of Canada released its Spring Economic Update 2026, announcing several proposals that may affect individuals (including globally mobile employees) and their employers. Key measures include a reduction to the Canada Pension Plan (CPP) contribution rate, an extension of the Home Buyers' Plan (HBP) repayment grace period, and changes intended to simplify access to the Disability Tax Credit (DTC).1,2
WHY THIS MATTERS
The CPP contribution rate reduction could lower payroll costs and assignment cost projections for employers, while increasing employees' take-home pay. The proposed HBP extension may provide additional flexibility for assignees returning to Canada, or individuals purchasing a home in Canada following a relocation, by extending the period before repayments begin. Efforts to simplify access to the DTC may help eligible employees and family members access valuable tax relief and related federal programs more easily.
Key Highlights of the Spring Economic Update 2026
Proposed Reduction of CPP Contribution Rate
The Spring Economic Update announced the following reductions:
Current | Proposed (2027) |
Employee: 4.95% | Employee: 4.75% |
Employer: 4.95% | Employer: 4.75% |
Combined: 9.9% | Combined: 9.5% |
According to the government, the proposed reduction in the CPP contribution is estimated to result in annual savings of about $133 for an employee earning $70,000 a year, with equivalent savings for their employer. These amounts will vary slightly based on the year's maximum pensionable earnings and payroll calculations.
The proposal affects only the base CPP contribution rate.
Extension of HBP Repayment Grace Period
Under the current HBP rules, participants are generally required to begin repaying amounts withdrawn from their registered retirement savings plan (RRSP) in the second year following their first HBP withdrawal.
Budget 2024 introduced a temporary measure allowing participants who made their first HBP withdrawal between January 1, 2022, and December 31, 2025, to delay the start of repayments until the fifth year after the withdrawal rather than the second year.
The Spring Economic Update 2026 proposes extending the availability of this enhanced five-year grace period to individuals making a first HBP withdrawal up to December 31, 2028. The 15-year repayment requirement is unchanged.
Streamlining the DTC Application Process
The government also announced its intention to streamline and simplify the DTC application process for individuals with certain long-lasting medical conditions, their families, and for medical practitioners.
The Spring Economic Update identifies more than 40 qualifying conditions that may be eligible for streamlined application. Under the proposal, a qualified medical practitioner would only need to certify that an individual has one of the listed medical conditions. The practitioner would no longer be required to certify that the impairment is severe and prolonged, and that its effects meet the legislated thresholds regarding daily living impacts. The government also expands the list of medical practitioners who can certify eligibility for the DTC.
KPMG INSIGHTS
In light of Canada’s Spring Economic Update 2026, employers and affected taxpayers might wish to consider:
- Employers could review Canadian assignment cost projections and payroll assumptions for 2027 and later years, particularly where CPP contributions are included in estimated assignment costs.
- Employers could identify whether mobility communications for inbound or returning assignees should address the proposed HBP repayment-grace-period extension.
- Taxpayers could verify whether the proposed DTC changes could affect eligibility, certification requirements, or access to related federal benefits and programs.
- Program managers may monitor whether these proposals are enacted as announced and whether further administrative guidance is released.
If assignees and/or their programme managers have any questions or concerns about the scope of the updated framework, its application and potential impacts, and appropriate next steps, they should consult with their qualified professional or a member of the GMS team with KPMG in Canada (see the Contacts section).
ENDNOTES:
1 Department of Finance Canada, “Spring Economic Update 2026 – Tax Measures.”
2 Department of Finance Canada, “Spring Economic Update 2026 – Benefits.”
Contacts
Disclaimer
The information contained in this newsletter was submitted by the KPMG International member firm in Canada.
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