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ARTICLE · 24 SEPTEMBER 2026

Canada Proposes New Productivity Mega Deduction

Borden Ladner Gervais LLP
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The Canadian federal government has proposed a Productivity Mega Deduction that would allow businesses to immediately expense the full cost of eligible capital investments rather than deducting them over time. This permanent tax measure aims to reduce Canada's marginal effective tax rate on new business investment to 6.4 percent, positioning it as the lowest among G7 countries and potentially reshaping where multinational corporations choose to locate capital-intensive projects.

CanadaTax
Siwei Chen
Siwei Chen
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On Sept. 15, 2026, the federal government announced a proposed Productivity Mega Deduction (PMD) that would significantly expand immediate expensing for capital investments by Canadian businesses. Draft legislative proposals released with the announcement provide important details regarding eligible taxpayers, qualifying property and applicable limits. Providing further context on these rules, BLG partner Steve Suarez authored the article “Ottawa gets it on tax policy, gamechanger ‘mega deduction’ shows” in The Globe and Mail.

If enacted as proposed, the PMD allows taxpayers to deduct the full undepreciated capital cost of eligible property in the taxation year it becomes available for use, rather than deducting the cost over time under the capital cost allowance (CCA) system. The PMD is therefore a timing measure: it does not increase the total deduction available over the life of an asset, but it accelerates tax relief.

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