Zero emission vehicles purchased on or after March 19, 2019, will be eligible for capital cost allowance (CCA) at 100% with no half-year rule.
Only new vehicles will qualify, and they must be fully electric, a plug-in hybrid with a battery capacity of at least 15 kWh or fully powered by hydrogen.
Two new CCA classes will be added for that purpose:
· Class 54 for zero-emission vehicles otherwise included in Class 10 or 10.1 (which presently include most motor vehicles)
· Class 55 for zero-emission vehicles otherwise included in Class 16 (which presently includes heavy freight tractor units and taxicabs)
In the case of class 54, the amount on which CCA can be claimed will be limited to $55,000 (plus sales taxes) per vehicle.
To parallel the income tax proposals, Budget 2019 proposes to increase the amount of GST/HST that businesses can recover in respect of zero-emission passenger vehicles.
The 100% rate will apply from March 19, 2019, to the end of 2023. For acquisitions in calendar 2024 and 2025, the first-year enhanced allowance will decline to 75%, with a further decline to 55% for 2026 and 2027.
Any undepreciated capital cost remaining after the year of acquisition will be eligible for CCA of 30% (Class 54, the same as Class 10 and 10.1) or 40% (Class 55, the same as Class 16). CCA must be prorated for short taxation years. When a Class 55 vehicle is disposed of, the proceeds which reduce the undepreciated capital cost pool will be prorated based on the total cost compared to the $55,000 depreciable limit.
An election to forego these special rules, and place these vehicles in Class 10, 10.1 or 16, will be available.