Published | Categories : Income tax - individuals, Income tax - businesses

Capital Cost Allowance

Harmonization with certain measures announced in the Economic Statement of the Department of Finance Canada

On November 21, 2018, the Department of Finance Canada released the 2018 Fall Economic Statement outlining a number of changes to federal tax legislation and regulations.

Subject to the special rules mentioned below with regard to a property that is qualified intellectual property or property that is composed of general-purpose electronic data processing equipment, the Québec tax regulations will be amended to incorporate, with adaptations based on their general principles, the following proposed amendments to the Income Tax Regulations concerning accelerated depreciation:

  • allow taxpayers to write off the full cost of machinery or equipment used in manufacturing or processing 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;
  • allow taxpayers to write off the full cost of 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 the taxation year in which the property becomes available for use.

Accelerated depreciation of property that is qualified intellectual property or general-purpose electronic data processing equipment

The proposed changes to the federal tax system regarding accelerated depreciation will be adjusted, for the purposes of Quebec's tax system, so that a taxpayer may deduct, for the taxation year in which the property becomes available for use, the full cost of acquisition of a property that is qualified intellectual property or general-purpose electronic data processing equipment.

Qualified intellectual property means property acquired after December 3, 2018, that is a patent or a right to use patented information, a licence, a permit, know-how, a commercial secret or other similar property constituting knowledge, and that:

  • is property included in Class 14 of Schedule B to the Regulation respecting the Taxation Act, property included in Class 44 of that schedule or property that is incorporeal capital property;
  • is acquired by a taxpayer in the course of a technology transfer or is developed by or on behalf of the taxpayer with a view to enabling the taxpayer to implement an innovation or invention concerning the taxpayer's business;
  • begins to be used within a reasonable time after being acquired or after its development is completed;
  • is used, for the period covering the process of implementing the innovation or invention, only in Québec.

General-purpose electronic data processing equipment is property included in Class 50 of Schedule B to the Regulation respecting the Taxation Act.

For more information, see pages 8 to 11 of Information Bulletin 2018-9 (PDF – 533 KB) published by the Ministère des Finances on December 3, 2018.

Change and elimination of the additional capital cost allowance of 60%

The March 2018 Québec Economic Plan introduced an additional capital cost allowance of 60%.

The tax legislation will be amended to change the amount that a taxpayer may deduct in computing income, on account of the additional capital cost allowance of 60% in respect of qualified property, for the taxation year in which the property becomes available for use, and for the following year. These changes will apply to qualified property acquired after November 20, 2018, but not later than December 3, 2018.

The additional capital cost allowance of 60% was eliminated on December 4, 2018.

For more information, see pages 11 to 15 of Information Bulletin 2018-9 (PDF – 533 KB) published by the Ministère des Finances on December 3, 2018.

Introduction of an additional capital cost allowance of 30%

To encourage continued investment in manufacturing and processing equipment, clean energy generation equipment, general-purpose electronic data processing equipment and certain intellectual property, an additional capital cost allowance of 30% will be introduced. This additional capital cost allowance will be permanent.

The tax legislation will be amended to allow a taxpayer who acquires contemplated property after December 3, 2018, to deduct in computing income from a business for a taxation year, an amount corresponding to 30% of the amount deducted in computing such income, for the previous taxation year, on account of the capital cost allowance for the contemplated property.

Contemplated property is:

  • machinery or equipment used in manufacturing or processing, namely, property included in Class 53 of Schedule B to the Regulation respecting the Taxation Act;
  • clean energy generation equipment, namely, property included in Class 43.1 of the schedule or property included in Class 43.2 of the schedule;
  • property composed of general-purpose electronic data processing equipment and systems software for that equipment, namely, property included in Class 50 of the schedule, other than property that had allowed or could have allowed the taxpayer to claim the additional capital cost allowance of 60%;
  • qualified intellectual property.

For more information, see pages 15 to 16 of Information Bulletin 2018-9 (PDF – 533 KB) published by the Ministère des Finances on December 3, 2018.

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