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ARTICLE · 17 SEPTEMBER 2026

Understanding Canada’s new "Productivity Mega Deduction": Broad-based, immediate, and permanent expensing

Gowling WLG
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Canada's new Productivity Mega Deduction promises to slash the marginal effective tax rate on business investment to just 6.4%, positioning the country as the most competitive G7 nation for capital deployment. This permanent tax incentive extends immediate expensing to roughly 65% of capital assets, fundamentally reshaping the economics of investing in Canadian operations across manufacturing, energy, technology, and resource sectors.

CanadaTax
Laura Gheorghiu
Laura Gheorghiu
Thomas Witteveen
Thomas Witteveen
Yash Chavda
Yash Chavda
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On September 15, 2026, at the first Canada Investment Summit in Toronto, Prime Minister Mark Carney announced the “Productivity Mega Deduction,” a proposal that will reportedly reduce Canada’s marginal effective tax rate on new business investment from 13% to 6.4%, making it “the lowest of any major economy in the world and less than half the rate in the United States.” The goal of the new rules, according to the Prime Minister, is to ensure that “investment dollars will go a lot further in Canada than anywhere else in the advanced world.”

For the full news release, see here. For the full backgrounder from the Department of Finance Canada, see here.

Current rules: Capital cost allowance & immediate expensing

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