Canada’s 2025 tax incentives: A strategic window for manufacturing investment
Oscar Torres
by Oscar Torres
Canada’s 2025 Federal Budget introduced measures to stimulate investment, improve productivity, and support long-term growth. A key change was the temporary immediate expensing for eligible manufacturing and processing buildings, effective 04 November 2025.
For businesses operating in Canada, or considering expansion to Canada, this presents an opportunity to accelerate tax deductions and improve project economics.
What is immediate expensing?
Businesses can deduct 100% of the cost of an eligible manufacturing or processing building in the year it is placed into use, including new construction and qualifying additions or alterations. To qualify, at least 90% of the building must be used for manufacturing or processing.
This allows businesses to realise tax benefits upfront, improving cash flow and reducing after-tax investment costs.
Phase-out schedule
The enhanced deduction applies only in the first year the building is used for manufacturing or processing, and is subject to a defined phase-out as follows:
100% deduction for property used before 2030;
75% deduction in 2030 and 2031;
55% deduction in 2032 and 2033; and
Eliminated after 2033.
Broader investment incentives
This measure complements other Budget 2025 incentives, including an enhanced first-year capital cost allowance (CCA). Effective 01 January 2025, businesses have been able to claim up to three times the normal first-year deduction on many capital assets. Certain manufacturing equipment, clean energy assets, and zero-emission vehicles may qualify for full expensing. These incentives run through 2029, with a phase-out to 2034.
Why this matters
This is not simply a tax update. It is a strategic lever. Businesses can accelerate deductions, improve cash flow, reduce project costs, and enhance returns. However, the greatest benefit is available before 2030, making timing critical.
Organisations should assess whether projects can be accelerated, whether investments meet eligibility requirements, and how these incentives align with broader tax planning. These decisions directly impact investment outcomes.
Next steps
Immediate expensing for manufacturing and processing buildings presents a compelling opportunity for businesses investing in Canadian operations. However, realising the full benefit requires proactive planning, careful structuring, and alignment with broader business objectives.
Bateman MacKay LLP helps clients evaluate eligibility, model impact, and structure investments to maximise long-term value. If expansion or facility upgrades are planned, now is the time to act.
Oscar Torres CPA, CA, LPA, is the managing partner at Bateman MacKay LLP. He advises owner-managed businesses, entrepreneurs, and international clients on assurance, tax, and advisory matters, delivering tailored strategies that support growth, preserve wealth, and drive long-term success. Contact Oscar.
XLNC member firm Bateman MacKay LLPBurlington, ON, CanadaT: +1 905 632 6400
Accounting, Audit, Corporate Finance, Fiduciary, Management Consulting, Strategy, Tax
Bateman MacKay LLP is a Canadian CPA firm providing tax, accounting, and advisory services to privately owned businesses. With offices in the Greater Toronto Area, the firm delivers proactive, tailored solutions that support growth, optimise performance, and guide clients across Canada.
