Federal tax measures to boost investments in Canada ─ permanent immediate expensing and faster rulings

In brief

What happened?

On September 15, 2026, the Department of Finance released draft legislative proposals to implement the newly announced Productivity Mega Deduction, which will provide immediate expensing for a broad‑based range of depreciable property that is acquired and available for use after September 14, 2026.

In contrast to other recent accelerated tax depreciation measures that have been temporary in nature, this immediate expensing (i.e. 100% capital cost allowance [CCA] deduction), which allows taxpayers to fully write off the cost of an investment in the year that it becomes available for use, will be permanently available. Assets that are not eligible for immediate expensing will continue to receive an enhanced first‑year CCA deduction under the Accelerated Investment Incentive (i.e. a temporary increased first‑year CCA deduction).

In addition, the Minister of Finance and National Revenue, François-Philippe Champagne, announced on September 14, 2026 that the Canada Revenue Agency (CRA) will prioritize responses to advance income tax ruling requests related to investments of $1 billion or more in Canada, effective immediately.

Why is it relevant?

These measures are intended to attract business investment to Canada by enhancing certainty and simplicity and strengthening the country’s tax competitiveness. The Productivity Mega Deduction is a significant tax incentive — it builds on previously announced accelerated CCA measures and other incentives.

Actions to consider

review planned capital investments to identify property that may qualify for immediate expensing and confirm CCA classifications and eligibility
model the cash‑tax impact of immediate expensing, including its effect on taxable income, losses, financing arrangements and the timing of other deductions
revisit major investment decisions and tax structures, including whether investments of $1 billion or more could benefit from a prioritized CRA advance income tax ruling

In detail

Productivity Mega Deduction

The Productivity Mega Deduction, which provides a 100% CCA deduction in the year the depreciable property becomes available for use, will be available on a permanent basis for most depreciable property that is acquired and available for use after September 14, 2026.

Eligible property and expenses

Under the Productivity Mega Deduction, depreciable property that is eligible for immediate expensing will include all capital property that is subject to the CCA rules, except for:

buildings (and additions to buildings) included in CCA classes 1 and 3
property included in CCA:
- classes 14 and 14.1 (e.g. franchises, licenses and goodwill)
- class 51 (e.g. regulated natural gas distribution pipelines)
certain vehicles in CCA classes 10 and 10.1, including passenger and rental vehicles, taxis and certain delivery vans or pick‑up trucks — although new vehicles of these types that are assembled in Canada will be eligible for the Productivity Mega Deduction, and
property depreciated under CCA schedule V (industrial mineral mines) and schedule VI (timber limits and cutting rights) of the Income Tax Regulations

Immediate expensing will also be available for Canadian development expenses incurred after September 14, 2026.

Manufacturing and processing (M&P) buildings are not eligible for the Productivity Mega Deduction (because of the exclusion of class 1 buildings); however, they continue to be eligible for the temporary immediate expensing that was announced in the 2025 federal budget.¹

Restrictions

Eligible property that has been used, or acquired for use, for any purpose before it is acquired by the taxpayer will not be eligible for immediate expensing if:

the taxpayer or a non‑arm’s‑length person previously owned the property
the property has been transferred to the taxpayer on a tax‑deferred “rollover” basis

Rules will also apply to restrict the ability of individuals, and partnerships with members who are individuals, to create or increase a loss from the business or property, by claiming the Productivity Mega Deduction.

Liquefied natural gas (LNG) facilities

Immediate expensing in respect of CCA class 47 liquefaction equipment used in LNG facilities takes the form of an additional allowance that will bring the CCA rate for this property up to 100%. This additional allowance will only be deductible against income of the taxpayer that is attributable to the liquefaction of natural gas at that facility.

The 10% accelerated CCA rate for eligible class 1 non‑residential buildings used in LNG facilities that was announced in the federal 2026 Spring Economic Update will continue to apply.² However, LNG facilities will not be required to satisfy the expected emissions intensity requirement that was proposed in the 2026 Spring Economic Update to qualify for either immediate expensing for class 47 liquefaction equipment or the accelerated CCA for eligible class 1 non‑residential buildings.

Since this immediate expensing for class 47 liquefaction equipment used in LNG facilities modifies a 2025 federal budget proposal, it will be available for eligible assets acquired after November 3, 2025.

Advance income tax rulings

An advance income tax ruling is a written statement confirming how the CRA’s interpretation of Canadian income tax law applies to a taxpayer’s specific contemplated transaction. The CRA charges a fee for advance income tax ruling decisions, which are binding and give investors greater clarity and predictability on how Canadian tax treatment will apply to their investments. Effective September 14, 2026, the CRA will prioritize ruling requests for proposed transactions involving $1 billion or more of investments in Canada and provide major investors with more timely decisions on how Canadian income tax law will apply — before they commit capital to a Canadian investment.

The takeaway

The Productivity Mega Deduction represents a notable shift in Canadian tax policy by permanently allowing immediate expensing for a broad range of eligible capital investments. It could significantly improve cash flow and reduce the after‑tax cost of investing in Canada. Businesses should assess how the proposed rules (and exclusions) affect current and planned investments and monitor the implementing legislation and CRA guidance. Together with prioritized CRA rulings for investments of $1 billion or more, these measures are intended to provide greater certainty and encourage large-scale business investment in Canada.

^{1 The 2025 federal budget introduced a 100% CCA deduction for eligible M&P buildings (including eligible additions or alterations) in Canada that are acquired after November 3, 2025 and first used for M&P before 2030. This 100% CCA deduction is gradually phased out for buildings that are first used for M&P after 2029 and eliminated after 2033. This measure has not yet been enacted, but is included in Bill C‑31, A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025,which passed second reading in the House of Commons on June 3, 2026. The House of Commons is adjourned until September 21, 2026.}

^{2 For more information, see our Tax Insights “2026 Federal Spring Economic Update: Tax highlights.”}

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