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Currently, machinery and equipment used in manufacturing or processing is generally eligible for a CCA rate of 30 per cent under Class 43 of Schedule II to the Income Tax Regulations. Budget 2007 proposes to temporarily increase the CCA rate for manufacturing and processing machinery and equipment, that would otherwise be included in Class 43, to a 50-per-cent straight-line rate. Taking into account the half-year rule, these assets may be written off on average over a two-year period, starting at the mid-point of the year in which the asset is acquired and ending at the mid-point of the second year following the acquisition. This results in an effective deduction rate of up to 25 per cent for the first year, up to 75 per cent for the second year (less any deduction claimed for the previous year), and up to 100 per cent for the third and subsequent years (less any deductions claimed for previous years). The increased rate will apply to eligible machinery and equipment acquired on or after March 19, 2007 and before 2009.
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Spring 2008 Budget Update
Manufacturers will be able to use the accelerated CCA, on a declining basis, until the end of the 2012-13 fiscal year. The current 50-per-cent straight-line accelerated CCA treatment will apply for one additional year until the end of 2009. In 2010, the accelerated treatment will be provided on a declining basis over a two-year period
Ontario Spring 2008 Budget Proposals
Subject to enactment of the applicable federal regulations, this Budget proposes to extend this tax incentive for manufacturers in line with the proposed federal rates and effective dates. The Budget also proposes to eliminate the Capital Tax one year earlier, effective January 1, 2007, for Ontario companies primarily engaged in manufacturing. The credit will be by either issuing a refund cheque or offsetting other corporate taxes owing.