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CRA changes CCA for IT

Computer Equipment and Systems Software

The Budget proposes to increase to 100% the CCA rate applicable to computer hardware and systems software acquired after January 27, 2009 and before February 1, 2011. Further, the half- year rule will not apply to property that is subject to this accelerated CCA treatment.

Computer equipment otherwise included in Class 50 will be eligible for this accelerated CCA regime. Such equipment is general-purpose electronic data processing equipment and systems software for that equipment. In addition, to be eligible for the accelerated CCA, the computer equipment and systems software must:

  • be situated in Canada;
  • be acquired for use in a business carried on in Canada or to earn income from property situated in Canada or for lease to a lessee who so uses the equipment or software; and
  • not have been used, or acquired for use, for any purpose before it is acquired by the taxpayer.

Generally computer equipment and systems software, unless it qualifies as manufacturing and processing equipment and is therefore included in Class 29, is included in Class 50 and is subject to a 55% CCA rate on a declining balance basis. Computer equipment and systems software that would otherwise be included in Class 29 as manufacturing and processing equipment will also benefit from the 100% CCA rate.

It should be noted that computer software, other than systems software, is already subject to a 100% CCA rate under Class 12.

– UPDATE! Revenue Canada considers iPhone’s computer equipment and so fall under the 100% rule for 2010.

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