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Tax Insights: Finance releases draft legislative proposals ─ Corporate income tax measures

February 09, 2022

Issue 2022-03

In brief

On February 4, 2022, the Department of Finance released draft legislative proposals (the proposals) to implement numerous previously announced tax measures. The proposals include the 2021 federal budget measures that:

  • allow immediate expensing of up to $1.5 million per taxation year of capital property acquisitions for certain businesses 

  • reduce corporate tax rates on eligible zero-emission technology manufacturing income 

  • expand eligibility for accelerated capital cost allowance (CCA) on clean energy equipment 

  • temporarily extend certain timelines relating to federal film or video production tax credits 

  • confirm the extent of the Canada Revenue Agency’s (CRA’s) audit authorities

This Tax Insights discusses these measures, for which the federal government has launched public consultations, with comments to be submitted by March 7, 2022 (April 5, 2022 for those relating to CRA’s audit authorities). 

Several upcoming Tax Insights, which will be available at, will discuss the following additional measures included in these proposals:

  • enhanced mandatory disclosure rules (2021 federal budget) 

  • new interest deductibility limits (2021 federal budget)

  • enhanced reporting requirements for trusts (2018 federal budget)

  • allocations to redeemers by exchange traded funds (2019 federal budget)

In detail

Immediate expensing

The 2021 federal budget proposed to temporarily provide immediate expensing of up to $1.5 million per taxation year in respect of eligible property acquired by a Canadian-controlled private corporation (CCPC). The proposals would implement this measure and make it available to unincorporated businesses carried on directly by certain individuals and partnerships, as shown in Table 1.

Table 1

Eligible property1

acquired after

AND available for use before


April 18, 2021

January 1, 2024

Individuals (other than trusts)



December 31, 2021

January 1, 2025


all members are individuals


January 1, 2024

  1. Eligible property consists of capital property that is subject to the CCA rules, other than property included in classes 1 to 6, 14.1, 17, 49 and 51. Property that has been used or acquired for use before it was acquired by the taxpayer is only eligible for immediate expensing if: 

    • neither the taxpayer nor a non-arm’s length person previously owned the property, and

    • the property has not been transferred to the taxpayer on a tax-deferred basis

  2. Eligible partnerships mean those in which all the partners would have been eligible for the immediate expensing, had they carried on the partnership’s business directly. Multi-tiered partnerships are not eligible.

The immediate expensing is only available for the taxation year during which the property becomes available for use and is prorated for short taxation years. The $1.5 million annual limit must be shared among associated CCPCs, and for this purpose individuals and partnerships are deemed to be corporations. For individuals and partnerships, deductions are limited to their income for the taxation year from the related business or property, so that a loss cannot be created or increased from the immediate expensing. For all taxpayers, other existing limitations on the amount of annual CCA applicable in certain cases can also continue to restrict the immediate expensing. To be eligible for immediate expensing, the property must be designated as such in prescribed form by the CCPC, individual or partnership and filed by their filing due date for that taxation year.  

Reduced corporate tax rates for zero-emission technology manufacturing 

The proposals would implement the 2021 federal budget measure that provides a temporary reduction in corporate income tax rates to taxpayers involved in “qualified zero-emission technology manufacturing activities.” Effective for taxation years beginning after 2021, eligible corporations can claim a deduction for the relevant percentage, as shown in Table 2, of tax otherwise payable on eligible income from qualified activities. 

Table 2

Taxation year begins in


2022 to 2028




2032 or later

Tax rate reduction for income from “qualified zero‑emission technology manufacturing activities”







Resulting effective tax rate on

income also eligible for the small business deduction







other eligible income







A corporation’s eligible income will generally be equal to its income from active businesses carried on in Canada multiplied by the proportion of its total labour and capital costs that are used in qualified activities. 

A taxpayer can only qualify for the reduced tax rates on its eligible income if at least 10% of its gross revenue from all active businesses carried on in Canada is derived from qualified activities.

The draft legislative proposals provide a list of eligible property, the manufacturing or processing of which could meet the definition of qualified zero-emission technology manufacturing activities. It includes:

  • solar, wind and water energy conversion equipment

  • geothermal energy equipment

  • electrical energy storage equipment (for storage of renewable energy)

  • equipment used to produce hydrogen by water electrolysis or to charge or dispense hydrogen to a zero-emission vehicle

  • a plug-in hybrid motor vehicle

  • fully-electric automotive equipment powered by only hydrogen or a combination of electricity and hydrogen

Accelerated CCA on clean energy equipment 

The proposals expand eligibility for CCA classes 43.1 and 43.2 to include certain additional types of renewable energy generation and storage equipment, for property acquired and generally available for use after April 18, 2021. They also remove or restrict eligibility for these CCA classes for certain types of fossil-fuel-related property that become available for use after 2024. 

Film or video production tax credits 

The proposals temporarily extend certain timelines for the Canadian Film or Video Production Tax Credit (CPTC) and the Film or Video Production Services Tax Credit (PSTC) by 12 months, in respect of productions for which eligible expenditures were incurred by taxpayers in their taxation years ending in 2020 or 2021. For both the CPTC and the PSTC, taxpayers will be required to file a waiver with the CRA and the Canadian Audiovisual Certification Office to extend the assessment limitation period in respect of the relevant years to take into account this 12-month extension.

Audit authorities 

The proposals confirm the authority of CRA officials to require persons to answer questions in the form specified by the CRA official, and to provide reasonable assistance for any purposes related to the administration or enforcement of the Income Tax Act. This measure will come into force on royal assent of the enacting legislation. 

The takeaway

The measures discussed in this Tax Insights are largely unchanged from their initial proposal in the 2021 federal budget. We will continue to keep you informed of any further developments. In the meantime, businesses should consider whether they can benefit from the immediate expensing, reduced corporate tax rates, expanded CCA eligibility or CPTC/PSTC timeline extension. 


Contact us

Ken Griffin

Ken Griffin

Partner, PwC Canada

Tel: +1 416 815 5211

Ted Cook

Ted Cook

Partner, Tax Dispute Resolution Services, PwC Law LLP, Canada

Tel: +1 613 755 4360

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