Immediate expensing property
To be eligible for the immediate expensing, the property acquired must be "immediate expensing property" (Reg. 1104(3.1)), which means property of a prescribed class that is acquired on or after September 15, 2026, other than “excluded property” (discussed below). Also, the property must meet either condition (i) or (ii).
Condition (i)
The property has not been used for any purpose before it was acquired by the taxpayer. Also, no amount of a CCA deduction or terminal loss has been deducted in respect of the property by anyone before the property was acquired. In other words, the asset must be new and not depreciated for tax purposes in the past by another taxpayer.
This generally allows new unused property acquired from a non-arm’s length person to be eligible for immediate expensing. However, property acquired before September 15, 2026, which was later transferred to the taxpayer is ineligible for immediate expensing, unless, very generally, the property was acquired by the taxpayer or a non-arm’s length person or partnership from an arm’s length party who held the property as inventory (Reg. 1100(0.3)).
Condition (ii)
The property was not:
(A) acquired in circumstances where the taxpayer was deemed to have previously claimed CCA (i.e., property acquired on a rollover basis) or where the undepreciated capital cost ("UCC") was reduced by an amount determined by reference to the amount by which the capital cost of the property to the taxpayer exceeds its cost amount (e.g., where a corporation acquired the property from an amalgamation); or
(B) previously owned or acquired by the taxpayer or a non-arm’s length person or partnership.
This condition effectively allows property that has been previously used to be immediate expensing property, if it was acquired at arm’s length.
Excluded property
Immediate expensing property excludes any property that is “excluded property” (Reg. 1104(3.1)), which means any property that is:
(a) Included in Class 1(q) (buildings and structures);
(b) Included in Class 3(k) (additions or alterations to Class 3 buildings and structures);
(c) Included in Class 14 (patents, franchises, concessions or licences for a limited period);
(d) Included in Class 14.1 (goodwill and other intangible property that would have been previously considered “eligible capital property”);
(e) Included in Class 51 (natural gas pipelines);
(f) An “excluded vehicle” (see below);
(g) A vehicle included in Class 10.1 for which a taxpayer elects to be excluded property (discussed below);
(h) Qualified liquefaction equipment;
(i) An industrial mineral mine or a right to remove industrial minerals from an industrial mineral mine; or
(j) A timber limit or a right to cut timber from a timber limit, other than a timber resource property.
Excluded vehicles
As noted above, an “excluded vehicle” (Reg. 1104(3.1)) is excluded property, which means it is not eligible for the immediate expensing. Very generally, most vehicles that would be included in Class 10 or 10.1 are ineligible for immediate expensing, unless they are a new vehicle that was assembled in Canada or a zero-emission vehicle.
An excluded vehicle means property included in Class 10 or 10.1 that either has been used for any purpose before it was acquired by the taxpayer, or was assembled in a country other than Canada. Thus, a vehicle is not an excluded vehicle and qualifies for immediate expensing if it is brand new and was assembled in Canada. Otherwise, it will be an excluded vehicle if it meets any of the following conditions:
- It is a passenger vehicle — i.e., an “automobile,” which is a motor vehicle that is designed or adapted primarily to carry individuals on highways and streets and that has a seating capacity for not more than the driver and 8 passengers. A passenger vehicle does not include zero-emission vehicles and certain emergency-response vehicles.
- It is a motor vehicle acquired primarily for use as a taxi.
- It is a motor vehicle acquired to be sold, rented or leased in the course of carrying on a business of selling, renting or leasing motor vehicles.
- It is a motor vehicle used for the purpose of transporting passengers in the course of carrying on a business of arranging or managing funerals.
- It is a van, pick-up truck, or similar vehicle used for the transportation of goods, equipment, or passengers.
- Thus, most common vehicles are excluded vehicles and are ineligible for the immediate expensing. Again, exceptions are available to new vehicles that were assembled in Canada and zero-emission vehicles
Class 10.1 vehicles that are immediate expensing property can be subject to a recapture of CCA upon disposal, though paragraph 13(7)(i) would prorate the proceeds of disposition to reflect the non-deductible portion of the capital cost.
A taxpayer may also elect for a Class 10.1 vehicle to be excluded property (Reg. 1103(2k)), such that it is not immediate expensing property and is ineligible for immediate expensing, but would be exempt from recapture when it is disposed of.
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