--- title: "Employee Ownership Trust: $10 Million Exemption Made Permanent" url: https://www.everstonecpa.com/tax-update/employee-ownership-trust-exemption description: "Up to $10 million of capital gains on a qualifying sale to an employee ownership trust can be exempt. See the conditions, and who realistically qualifies." type: tax-update updated: 2026-10-04 summary: "The exemption from tax on up to $10 million of capital gains on a qualifying sale of a business to an employee ownership trust or a worker cooperative has been made permanent, for dispositions after 2026." faq_count: 4 publisher: EverStone CPA Inc., a Chartered Professional Accountant firm registered with CPA British Columbia and CPA Alberta service_area: British Columbia, Alberta, Ontario and Manitoba language: en-CA contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online --- [Home](https://www.everstonecpa.com/) [Tax updates](https://www.everstonecpa.com/tax-updates) Employee ownership trust exemption Business succession # Employee ownership trust exemption — The $10 million employee ownership trust exemption is now permanent By EverStone CPA · Updated August 2026 The figures on this page, in one view. **Quick answer:** The exemption from tax on up to $10 million of capital gains on a qualifying sale of a business to an employee ownership trust or a worker cooperative has been made permanent, for dispositions after 2026. **In force** · Permanent, for dispositions after 2026 This measure is law and applies now. ## How it works Most business owners plan to sell one day. The usual routes are a third-party buyer or a family successor, and many owner-managed businesses have neither. An employee ownership trust is a third route: the business is sold to a trust that holds it for the benefit of its employees. The owner is paid, and the people who already run the business come to own it. To make that route viable, the tax system exempts up to $10 million of capital gains on a qualifying sale to an employee ownership trust or a worker cooperative. That exemption was time-limited. It is now permanent, for dispositions after 2026. Employees rarely have capital, unlike financed third-party buyers. The trust and exemption let the business fund the sale over time. It is worth being clear that this is a genuine sale rather than a giveaway. The owner is paid for the business. What differs is who the purchaser is, how the purchase is funded, and how the gain is taxed. ## How it applies to you Owners considering selling to their employees rather than to a third party. For an owner-managed business with no family successor and no obvious buyer, this is a realistic exit rather than a theoretical one. Permanence is the substantive change. A time-limited exemption was very hard to plan around, because these transactions routinely take more than a year to arrange and a sale that slipped past the deadline lost the benefit entirely. Removing that cliff means the structure can be built at the pace it actually needs rather than raced to a date. **Incorporated, or about to be?** We prepare the T2 and year-end statements at a fixed fee quoted in writing before any work starts, and plan how you pay yourself. See [our corporate tax work](https://www.everstonecpa.com/tax-services), or [get a year-end quote](https://www.everstonecpa.com/book-online?service=payroll#enquiry-form). [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=payroll#enquiry-form) ## How to calculate it What the exemption covers: Calculation steps | Step | Detail | | Maximum exempt capital gain | $10 million | | Qualifying purchaser | an employee ownership trust or a worker cooperative | | Applies to | dispositions after 2026 | | Status | permanent | The $10 million is an exemption from capital gains on the sale, so it sits alongside the ordinary capital gains rules rather than replacing them. Gains beyond it are treated normally, with one-half included in income. ## What changed The exemption was time-limited, which made it very hard to plan around: a sale that slipped past the deadline lost the benefit entirely, and these transactions routinely take more than a year to arrange. Permanence removes that cliff. ## What to do If selling to your employees is a possibility, start the planning well before the intended sale year. This is a structural transaction, not a form to file. Qualifying conditions attach to the trust, to the business and to the shares. Meeting them takes deliberate setup, and they are tested at the transaction rather than afterwards. Permanence changes the calculation for owners who ruled this out because the deadline was unrealistic. That reason no longer applies. **The practical point.** An employee ownership trust sale is a structural transaction with qualifying conditions attached to the trust, the business and the shares. It takes time to set up properly, so the planning starts well before the intended sale year. An employee ownership trust is one of several succession routes, each with different tax results; [succession planning](https://www.everstonecpa.com/tax-planning-services-canada) compares them. ## The terms used on this page Employee ownership trust A trust that holds a business for the benefit of its employees. Worker cooperative A business owned and controlled by the people who work in it. Disposition The tax term for disposing of property — here, selling the business. ## Common questions about employee ownership trust exemption **Is the $10 million exemption still time-limited?** No. It is now permanent, for dispositions after 2026. **Why does permanence matter?** Because the deadline was the problem. A sale that slipped past it lost the benefit entirely, and these transactions routinely take more than a year to arrange. Permanence removes that cliff. **How are gains above $10 million treated?** Normally. The $10 million is an exemption from capital gains on the sale and sits alongside the ordinary capital gains rules rather than replacing them, so gains beyond it have one-half included in income. **When should planning start?** Well before the intended sale year. An employee ownership trust sale is a structural transaction with qualifying conditions attached to the trust, the business and the shares, and it takes time to set up properly. ## Where this comes from Every figure on this page is taken from the source below, not from interpretation: - [Spring Economic Update 2026 — Tax measures: supplementary information](https://budget.canada.ca/update-miseajour/2026/report-rapport/tm-mf-en.html) **General information, not tax advice.** This page explains a change in general terms. It cannot account for your circumstances and does not create a professional relationship. Confirm anything that affects a decision — [send an enquiry](https://www.everstonecpa.com/book-online?service=payroll#enquiry-form). 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