Source:
Department of Finance
Canada

Chapter 3- Action to Support Businesses and Communities

Highlights – Tax and Tariff Relief to Stimulate Business Investment

Capital Cost Allowance
The capital cost allowance (CCA) system determines how much of the cost of a capital asset a business may deduct each year for tax purposes. The Government’s approach has generally been to set CCA rates so that the deduction for capital costs is spread over the useful life of the asset. This ensures neutral tax treatment for different types of assets so that investment is allocated to its most productive use. Budget 2009 proposes temporary increases in CCA rates for computers, and machinery and equipment used in manufacturing or processing, to provide economic stimulus and assist Canadian businesses during this challenging economic period.

Providing Assistance to Businesses in All Sectors to Invest in Computers
Budget 2009 proposes a temporary 100-per-cent CCA rate for computer hardware and systems software acquired after January 27, 2009 and before February 1, 2011. In addition, the rule that restricts CCA deductions to one-half of the CCA write-off otherwise available in the first year will not apply to these computers.

This temporary measure will allow taxpayers to fully expense their investment in computers in one year. The measure will provide stimulus by assisting businesses to increase or accelerate investment in computers. It will also contribute to boosting Canada’s productivity through the faster adoption of newer technology. Businesses in all sectors of the economy, including the service sector, will benefit from this incentive.

Reducing Taxes for Small Businesses
Canada’s federal income tax system supports the growth of small businesses through a lower tax rate on the first $400,000 of qualifying income earned by a Canadian-controlled private corporation. The lower tax rate helps these small businesses to retain more of their earnings for reinvestment and expansion, thereby helping to create jobs and promote economic growth in Canada.

The Canadian Federation of Independent Business (CFIB) has emphasized to the Government the economic importance of helping small and medium-sized businesses to grow. To further support the growth of small businesses, Budget 2009 proposes to increase the amount of small business income eligible for the reduced federal tax rate of 11 per cent to $500,000 from the current limit of $400,000, as of January 1, 2009.

For further information on Budget 2009, please visit the Department of Finance website