Productivity Mega Deduction
INTRODUCED BY THE Government of Canada TO BOOST CANADA’S ADVANTAGE AS THE MOST COMPEtitive g7 country for new business investment.
Backgrounder
To boost business investment, enhance certainty and simplicity for businesses, and strengthen Canada’s tax competitiveness, the Government of Canada proposes to implement the Productivity Mega Deduction, which will provide immediate expensing for a broad-based range of depreciable property on a permanent basis. Immediate expensing allows taxpayers to fully write off the cost of an investment in the year that it becomes available for use. This powerful investment incentive will create the conditions for an extended period of higher investment—a Canadian investment supercycle.
This measure builds on the Productivity Super-Deduction announced in Budget 2025, which provides immediate expensing to about 15 per cent of investment in capital assets, including machinery, equipment, and buildings used for manufacturing and processing, clean energy generation and energy conservation equipment, zero-emission vehicles, patents, data network infrastructure, and computers.
The Productivity Mega Deduction would permanently provide immediate expensing to a much wider range of assets and expenses (i.e., about two-thirds of investment in capital assets would be eligible). The estimated incremental fiscal cost of the measure is $36 billion over five years, beginning in 2026-27.
Assets not eligible for immediate expensing will continue to receive an enhanced first-year deduction under the Accelerated Investment Incentive.
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