Federal Budget Restricts Diesel Fuel Excise Tax Relief | KPMG | CA

Federal Budget Restricts Diesel Fuel Excise Tax Relief

Federal Budget Restricts Diesel Fuel Excise Tax Relief

Canadian Tax Adviser, April 05, 2016. The 2016 federal budget proposes to restrict the scope of two relief provisions for diesel fuel that is used as heating oil or to generate electricity. Both of these measures will apply to fuel delivered or imported after June 2016, and to fuel delivered or imported before July 2016 that is used, or intended to be used, after June 2016.


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Finance Minister Bill Morneau delivered the government's 2016 federal budget on March 22, 2016. For full details of the budget, see TaxNewsFlash-Canada 2016-12, "2016 Federal Budget Highlights" [PDF 199 KB].

Generating electricity

Currently, the law provides an excise tax exemption for diesel fuel used in or by a vehicle to generate electricity if more than half of the electricity generated is used for purposes other than the operation of the vehicle (e.g., to heat, cool or light the vehicle, or to prepare meals or operate entertainment systems for passengers of the vehicle).

The budget proposes to restrict the exemption so that it does not apply to fuel used to produce electricity in any vehicle (e.g., trains, ships, airplanes, tractor trailers), regardless of the purpose for which the electricity is used.

Heating oil

The law also provides an excise tax relief for fuel oil, including diesel fuel, that is consumed to produce heat for any purpose, including in industrial processes (e.g., diesel fuel used by a paving contractor in the production of asphalt).

The budget proposes to limit this relief to fuel oil that is consumed exclusively for providing heat to a home, building or similar structure, and is not consumed for generating heat in an industrial process.

For more information, contact your KPMG adviser.


Information is current to April 05, 2016. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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