Sage Inspire Tour: Fixed Assets Managing Regulatory Compliance (Canada)

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Maintaining regulatory compliance

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The challenge of tax compliance
• A business must ensure ongoing
compliance with all Canadian tax
rules and regulations, including
bulletins up-dates released by the
Canada Revenue Agency (CRA).
• Capital Cost Allowance (CCA) is
the means by which a Canadian
business may claim depreciation
expenses for calculating taxable
income under the Income Tax Act.
• Form T2SCH8 is used to calculate
and file tax deductions for CCA on
assets acquired in 2006 or later.
• In the year the property is acquired,
usually only on one-half of the net
additions to a class can be claimed.

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How does CCA work?
• Assets are divided into over 50 groups
with appropriate CCA rates assigned
to them.
• The declining balance method is used
to calculate CCA deductions based on
CCA rate.
• Provinces and Territories often have
additional regulations governing CCA
reductions.
• In contrast to the practice followed in
the United States, there is no penalty
for failing to claim Capital Cost
Allowance. Unclaimed amounts are
not subject to recapture but can be
deducted in future tax years.

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What is NOT eligible under CCA?
A number of assets are NOT eligible for CCA deductions, as per regulations and
ruling of the Income Tax Rulings Directorate, which is the center of income tax
expertise within the Canada Revenue Agency (CRA).
• Land and living things, such as trees, shrubs, or animals
• Property the cost of which is deductible in computing the taxpayer's income
• Property that is already described in the taxpayer's inventory
• Property that was not acquired for the purpose of producing income
• Specified artwork and crafts acquired after November 12, 1981
• Property that is a camp, yacht, lodge or golf course or facility acquired after
December 31, 1974

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Accelerated CCA
The CRA and the tax authorities in provinces and territories have released a
number updates and exceptions which allows for an accelerated CCA. Eligible
assets include:
• Clean energy generation
Currently, class 43.1 and class 43.2 provide accelerated CCA at a rate of
30% and 50% respectively, on a declining-balance basis, for specified
clean energy generation and energy conservation equipment.
• Mining
For expenses incurred after March 20, 2013, the accelerated CCA for
eligible assets acquired for use in new mines or eligible mine expansions
will be phased-out as follows: 90% in 2017, 80% in 2018, 60% in 2019,
30% in 2020 and 0% after 2020.
• Manufacturing and processing machinery and equipment
Eligible machinery and equipment acquired in 2014 or 2015, will be eligible
for a temporary accelerated CCA rate of 50% on a straight-line basis.