Canada Bets On New Tax Proposals To Generate Investment: Go Big Or Go North

At the Canada Investment Summit that took place on September 14 and 15, 2026 (Summit), Prime Minister Mark Carney released two headline tax measures aimed at bolstering investment into Canada. At the Summit, which was run to attract large-scale investment into Canadian infrastructure and businesses, Mr. Carney outlined the “Productivity Mega Deduction” and the Minister of Finance announced a new priority advance income tax ruling, which signal a shift in how Canada competes for large-scale corporate investment. 

The Productivity Mega Deduction 

Building upon Mr. Carney’s “Productivity Super Deduction” announced in Budget 2025 (see our blog post on Budget 2025), which provided for accelerated deductions for specific types of equipment and buildings (covering about 15% of assets), the “Productivity Mega Deduction” (the Mega Deduction) permanently extends immediate expensing (100% write-off in the first year) for a wide range of depreciable property (covering about 65% of assets). The Mega Deduction will, as announced by Mr. Carney, cause Canada’s marginal effective tax rate on new business investment to “fall from roughly 13% to 6.4%,” making it the lowest of any major economy in the world and half the rate in the United States. 

Demonstrating the breadth of investments that Canada is trying to attract, qualifying assets for the Mega Deduction run the gambit, including, among other things, fibre-optic cables, mining property, oil and gas pipelines, software, computer equipment, aircraft, vehicles, patents, and Canadian development expenses incurred on or after September 15, 2026. Notable absences include buildings, certain vehicles, goodwill, licenses, certain natural gas distribution pipelines, and certain mineral and timber rights (although some of these may still qualify for the Productivity Super Deduction). 

Draft legislation was released on September 15, 2026 and the Government notes that the measure will cost $36 billion over five years, but could generate up to $22 billion a year, coupled with the creation of up to 80,000 jobs annually 10 years from now. Most notably, this deduction will be permanently included in the Income Tax Act, with no phaseout timelines, signalling Canada’s long-term commitment to attracting investment.

Priority for Advance Tax Rulings

A day before the announcement of the Mega Deduction, the Finance Minister announced that the Canada Revenue Agency (CRA) will prioritize advance income tax ruling (Rulings) requests for investments of $1 billion or more, effective as of September 14, 2026. In the news release, the Government noted that this change is intended to provide the clarity and certainty that new investors need to move forward with confidence to get projects built, by reducing tax risks. This announcement is meant to remove a material barrier for investors weighing multibillion-dollar commitments by removing tax uncertainty. Building on a similar announcement in the 2026 Spring Economic Statement, the CRA aims to issue these Rulings within 90 business days of receiving the relevant information. Hopefully this improves the currently lengthy Ruling process that makes applying for a Ruling impractical for fast-moving transactions.

Takeaways

Some takeaways from these announcements include: 

• With the after-tax cost of acquiring depreciable assets in Canada now significantly lower, purchasers of Canadian businesses should factor the value of immediate expensing into their asset-purchase versus share-purchase analysis.

• Canada should be arguably more competitive vis-a-vis the United States on the marginal effective tax rate for capital intensive operations. 

• It remains to be seen whether the accelerated Rulings process will encourage more taxpayers to apply for Rulings, or whether a four-month timeline for one-off Rulings is an adequate substitute for stable and predictable tax rules and policy.