Draft legislation on immediate expensing of eligible capital property released

On February 4, 2022, Finance Canada released draft legislation and a detailed backgrounder on Budget 2021’s proposal on immediate expensing of certain capital property of up to $1.5 million per year.

The draft legislation provides that immediate expensing is available to “Eligible Persons and Partnerships” (EPOPs) which include Canadian-Controlled Private Corporations (CCPCs) (as announced in Budget 2021) as well as individuals resident in Canada and Canadian partnerships with individuals and/or CCPCs as partners.   

Eligible property under the proposed legislation, known as “Designated Immediate Expensing Property” (DIEP), generally includes long lived assets subject to capital cost allowance (CCA) other than property included in CCA classes 1 to 6, 14.1, 17, 47, 49 and 51.  Further, to qualify as DIEP, the property must be acquired and made available for use within certain time limits:

  • For CCPCs: the property must be acquired after April 18, 2021 and available for use before January 1, 2024
  • For individuals and Canadian partnerships with only individuals as members: the property must be acquired after December 31, 2021 and available for use before January 1, 2025
  • For other partnerships: the property must be acquired after December 31, 2021 and available for use before January 1, 2024

It is important to note that the $1.5 million limit is shared among associated members of a group of eligible persons or partnerships (specific rules have been provided).

As mentioned in our news item dated January 26, 2022, the CRA previously told us the following on the application of these changes: 

“The CRA will only allow claims related to immediate expensing once supporting legislation has been introduced. Taxpayers are advised to request an adjustment request to their return once the supporting legislation receives Royal Assent.”

Now that supporting draft legislation has been released for comment, we will follow up with CRA on its plans for implementation timing.

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