Back Version française

New tax incentives proposed by Minister of Finance Bill Morneau may be attractive to investors, real estate and business owners.

As part of an effort to counter the increase of the United States’ tax competitiveness following the 2017 federal tax reform, Minister of Finance Bill Morneau proposed four immediate changes to Canada’s tax system that will be beneficial to investors, real estate and business owners. Three of these measures are intended at increasing the deduction for depreciation for tax purposes.

• Machinery and equipment : immediate write-off of the cost of machinery and equipment used for the manufacturing or processing of goods

The new measure proposes a 100% capital cost allowance (“CCA”) for machinery and equipment acquired after November 20, 2018, in the first year the property becomes available for use.

This is an increase from the current CCA of 25% and 50% respectively for the first and subsequent years of use of the property.

• Clean energy equipment: immediate write-off of the full cost of specified clean energy equipment

The new measure proposes an enhanced 100% first year CCA deduction for property currently included in class 43.1 or 43.2, comprising clean energy equipment, if it is acquired after November 20, 2018.

Depending on the type of asset, the current CCA is 15% or 25% in the first year and 30% or 50% in subsequent years.

• All other capital assets across all sectors of the economy: accelerated capital cost allowance

This new measure will effectively triple the CCA normally available in the first year of use of capital property.

The scope of this measure is very broad: it comprises all sectors of the economy and businesses of all sizes regarding all capital tangible or intangible assets.

The following table represents the changes to CCA for assets targeted by the three proposed measures:

Each of the foregoing measures are intended to apply as of November 21, 2018 until 2027, with a phase-out starting in 2024.

• Extension of the mineral exploration tax credit

The 15% Mineral Exploration Tax credit is proposed to be extended to March 31, 2024.

This extension will be of interest for Canadian mineral exploration companies for financing purposes and for their investors in flow-through shares.

Please contact us should you require additional information.

This publication is of a general nature, is as of the date indicated and is not intended to constitute an opinion or legal advice.  The facts and circumstances of your particular situation should be specifically identified and addressed before appropriate legal advice may be given.