FEDERAL BUDGET SUMMARY – 2019
BUSINESS INVESTMENT IN ZERO EMISSION VEHICLES
Motor vehicles are generally included in Class 10, 10.1 or 16. On November 21,
2018, the government announced a temporary first-year accelerated investment
incentive that allowed businesses to depreciate asset purchases in these classes at
capital cost allowance (CCA) rates of 45 percent, 45 percent and 60 percent,
respectively. Beyond the first year, the historical CCA rates will apply.
Budget 2019 proposes to provide a temporary enhanced first-year CCA rate of
100% in respect of zero-emission vehicles. This would include new vehicles that
are fully-electric, plug-in hybrids with a battery capacity of at least 15 k Wh or fully
powered by hydrogen. Two new CCA classes will be created for zero-emission
• Class 54 if the vehicle would otherwise be included in Class 10 or 10.1
• Class 55 if the vehicle would otherwise be included in Class 16
Class 54 will have a limit of $55,000 (plus sales taxes) on the amount of CCA
deductible. There is no limit to the amount of CCA deductible for Class 55.
This measure will apply to eligible zero-emission vehicles acquired on or after
March 19, 2019 and that become available for use before 2028, subject to a
phase-out for vehicles that become available for use after 2023.
EMPLOYEE STOCK OPTIONS
Budget 2019 introduces proposed changes to align Canada’s employee stock
option tax treatment with that of the U.S. by applying a $200,000 annual cap on
employee stock option grants (based on the fair market value of the underlying
shares) that may receive tax-preferred treatment for employees
of large, long-established mature firms.
For start-ups and rapidly growing Canadian businesses, employee stock option
benefits would remain uncapped.
Further details of this measure will be released before the summer of 2019. The
proposed changes will apply on a go-forward basis only and will not apply to
employee stock options granted prior to the announcement of legislative
proposals to implement the new regime.
MNP INSIGHT: Businesses may still have time to implement an employee
stock option plan under the existing regime. Also, Budget 2019 does not clarify
the extent to which Canadian-controlled private corporations (CCPC) and
applicable employment income tax-deferrals will be affected by the changes.