Capital Property

Capital property is depreciable property for which capital cost allowance (CCA) may be claimed. It is also non-depreciable property whose disposition (by way of sale or otherwise) results in a capital gain or capital loss.

Capital property includes real property such as land or a building as well as personal property such as machinery used by a business in its commercial activities. Other examples of capital property include the following:

  • refrigerators, ovens and other appliances
  • computers
  • photocopy machines
  • chairs, tables, sofas, beds, television sets and other goods used to furnish hotel rooms, waiting rooms and convention facilities.

Property included in certain classes under Schedule II of the Income Tax Regulations (for GST purposes) and in certain classes under Schedule B of the Regulation respecting the Taxation Act (for QST purposes) is not considered capital property.

This includes property in the following classes:

  • class 12 (for example, chinaware, cutlery and other tableware that costs less than $200)
  • class 14 (certain patents, concessions or licences for a limited period);
  • class 44 (patents, or a right to use patented information for a limited or unlimited period).

To claim an ITC and an ITR for property in these classes, follow the rules that apply to operating expenses.

Percentage of use in commercial activities

If you use 90% or more of a real property or more than 50% of a personal property for commercial activities, you may generally claim ITCs and ITRs for the full amount of the GST and QST you paid on the property.

The table below provides a checklist of the rules for claiming ITCs and ITRs on capital property. Please note that special rules apply to aircraft and passenger vehicles owned by registrants that are partnerships or individuals.

If you increase the percentage of commercial use of real property or personal property, you may be entitled to an additional ITC or ITR. If you reduce the percentage, you may have to remit GST and QST.

Rules for claiming ITCs and ITRs on capital property
Type of capital propertyPercentage of use in commercial activitiesAll registrants1Individuals who are registrants2Public service bodies
Personal property≤ 50%NoneNoneNone
> 50%100%100%100%
Real property≤ 10%NoneNoneNone
> 10% to ≤ 50%% of use% of use3None4
> 50% to < 90%% of use% of use100%4
≥ 90%100%100%100%
Passenger vehicles and aircraft5≤ 10%NoneNoneNone
> 10% à ≤ 50%NoneBased on CCA6None
> 50% à < 90%100%Based on CCA6100%
≥ 90%100%100%100%
  1. Under both the GST and QST systems, financial institutions can claim ITCs and ITRs based on the percentage of the capital property's use in commercial activities.
  2. With respect to purchases of passenger vehicles and aircraft, partnerships must follow the rules that apply to individuals.
  3. Registrant individuals may not claim ITCs or ITRs if the percentage of use of the capital property for personal purposes is higher than 50%.
  4. A public service body may elect to have the rules governing all registrants apply.
  5. The portion of the cost of passenger vehicles and aircraft giving entitlement to an ITC and an ITR is limited to the capital cost threshold under the Income Tax Act and the Taxation Act.
  6. ITC = CCA × 5/105; ITR = CCA × 9.975/109.975
Sample calculation: 60% commercial use of real property

You purchase a building (real property) and plan to use 60% of it in your commercial activities. You may therefore claim an ITC and an ITR equal to 60% of the GST and QST you paid on the building, since less than 90% of the real property is to be used in commercial activities.

Cost of building$500,000
GST (5% × $500,000)+ $25,000
QST (9.975% × $500,000)+ $49,875
Total$574,875
ITC claimed ($25,000 × 60%)$15,000
ITR claimed ($49,875 × 60%)$29,925
Sample calculation: 60% commercial use of personal property

You purchase a computer (personal property) for your business that you intend to use 60% of the time in your commercial activities. You may claim an ITC and an ITR equal to 100% of the GST and QST you paid on the computer, since the property is to be used more than 50% of the time in your commercial activities.

Cost of computer$4,000
GST (5% × $4,000)+ $200
QST (9.975% × $4,000)+ $399
Total$4,599
ITC claimed$200
ITR claimed$399

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