2018 Fall Economic Statement announced several tax goodies that will hopefully benefit Canadian businesses.
- The most notable among them is the Accelerated Investment Incentive for capital cost allowance (“CCA”). Full CCA write-offs for manufacturing and process property and eligible clean energy property.
- Mineral exploration tax credit will be extended for five years, until March 31, 2024.
- The Canadian government is promising several tax incentives to support the Canadian media. They will provide more clarity in Budget 2019. Specifically, the government is proposing a refundable tax credit for labour costs incurred by Canadian news organizations, a temporary non-refundable tax credit for eligible digital news media subscriptions, and to give non-profit news organizations qualified donee status.
The Quebec government will follow the accelerated capital cost allowance rules announced by the Department of Finance Canada announced in its Fall Economic Statement 2018 on November 21, namely to:
- allow taxpayers to write off the full cost of machinery or equipment used in manufacturing or processing and clean energy generation equipment, for the taxation year in which the property becomes available for use, where such property becomes available for use before 2024, with a gradual reduction afterwards;
- introduce an accelerated investment incentive, namely, an accelerated capital cost allowance making it possible to claim up to three times the amount that could otherwise be deducted for nearly all other types of assets, for the taxation year in which the property becomes available for use.
Ontario Minister of Finance, Vic Fedeli, announced on December 10, 2018, that the province will “match the federal capital cost allowance”. This statement presumably refers to the Accelerated Investment Incentive that was announced in the federal 2018 Fall Economic Statement last month.
- Although the computation of income for provincial purposes mostly relies on income computed for federal income tax purposes, capital cost allowance for Ontario purposes is slightly different. The CCA deduction from income is not the amount that is deducted under the federal Income Tax Act, but it is rather prescribed by regulation. That regulation, however, provides that the provincial CCA deduction is nearly identical to the federal computation, but with a few very minor differences, such as different rates applicable to certain farming equipment.
- As a result of this announcement, the government will ensure that its CCA rules harmonize with the Accelerated Investment Allowance for federal purposes, so Ontario businesses will be able to accelerate their CCA deductions for newly-acquired assets for the purposes of computing both federal and provincial income tax.
If you are looking to acquire manufacturing and processing or clean energy property or interested in Canadian media incentives contact us to save your tax.