Canada Introduces Productivity Mega Deduction to Spur Business Investment
On October 2, 2026, the Government of Canada announced the Productivity Mega Deduction, permanently expanding immediate expensing to more than 65% of business assets and projecting a reduction in the marginal effective tax rate on new investment from roughly 13% to 6.4%.
The Government of Canada introduced the Productivity Mega Deduction on October 2, 2026, a change to the business tax system designed to encourage businesses to build, expand, and create jobs. The policy allows businesses to immediately deduct the full cost of a much broader range of investments.
Under the new rules, eligible assets for immediate expensing will increase from roughly 15% to more than 65%. The expanded list includes fibre-optic cable, greenhouses, mining property, oil and gas pipelines, software, research and development, computer equipment, aircraft, vehicles, patents, rail track, bridges, and roads. Immediate expensing is being made permanent to provide long-term certainty for major investment decisions.
These changes are projected to lower the marginal effective tax rate on new business investment from roughly 13% to 6.4%, positioning Canada as having the lowest marginal effective tax rate on new business investment among major economies. The government stated that the deduction aims to lower the cost of investing in Canada and create conditions for an investment supercycle.
Federal ministers highlighted the initiative during visits to businesses in Atlantic Canada. Minister of Agriculture and Agri-Food Heath MacDonald visited Allan Equipment Manufacturing Ltd. in Charlottetown, Prince Edward Island. Minister of Fisheries Joanne Thompson visited Virtual Marine in Paradise, Newfoundland and Labrador.
The Productivity Mega Deduction forms part of a broader federal strategy. Over five years, government capital investments and incentives totalling about $280 billion are expected to enable more than $1 trillion in total investment.