Published | Category : Income tax - businesses

Introduction of an Additional Capital Cost Allowance of 35%

An additional capital cost allowance has been introduced for businesses that acquire manufacturing or processing equipment and computer equipment before April 1, 2019.

Qualified property

The additional capital cost allowance applies in respect of property that consists in:

  • general-purpose electronic data processing equipment and systems software for that equipment;
  • machinery and equipment acquired mainly with a view to using them for manufacturing and processing goods intended for sale or lease.

Qualified property must be put to use within a reasonable time of its acquisition and be used by the taxpayer mainly in the course of carrying on a business during a period of 730 consecutive days following the day it is first put to use. It must also be used mainly in Québec throughout the 730-day period.

Lastly, the property must be new at the time of its acquisition and be acquired by the taxpayer after March 28, 2017, but before April 1, 2019.

Additional capital cost allowance

For a given taxation year, the base amount of the allowance corresponds to 35% of the amount the taxpayer deducted, in calculating the taxpayer's income for the year, as depreciation in respect of the capital cost allowance class to which the taxpayer's qualified property belongs.

The amount that the taxpayer can deduct in calculating income for a taxation year on account of the additional capital cost allowance corresponds to the product of the base amount of the allowance for the year and the fraction of the undepreciated capital cost (UCC) of property of the capital cost allowance class attributable to the qualified property.

For the taxation year in which the qualified property is first put to use, the fraction of UCC attributable to the qualified property corresponds to the proportion represented by the ratio between one half of the acquisition cost of that property and the UCC used in calculating the capital cost allowance for the year.

For the taxation year following the taxation year in which the qualified property is first put to use, the fraction of UCC attributable to the qualified property will correspond to the proportion represented by the ratio between the depreciation balance attributable to the qualified property and the UCC used in calculating the capital cost allowance for the year.

In this respect, the depreciation balance attributable to the qualified property means the amount by which the cost of the qualified property exceeds the part of the capital cost allowance amount that the taxpayer deducted in calculating the previous year's income and that is proportionately attributable to the qualified property.

The taxpayer may have to pay a special tax if the property is not used mainly in Québec throughout the 730-day period.

The changes came into effect on March 28, 2017, and apply to property acquired after this date but before April 1, 2019.

For more information, see pages A.35 to A.37 of the Additional Information 2017-2018 (PDF – 2.71 MB), which is published by the Ministère des Finances.

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