Intangible capital property includes (but not limited to) goodwill, trademarks, franchises, customer lists, and patents. The intangible capital expenses are entered on schedule 10 and are called eligible capital property. Eligible capital property can also include expenses related to incorporation, reorganization and amalgamation. This would include any relating legal and accounting fees.

Unlike capital tangible property, the eligible capital property can not be deducted in full for tax purposes. Instead, only 75% of the amount paid is added to the cumulative eligible capital (CEC) account. A tax rate of 7% of the reduced balance is used as a deduction for tax purposes. The remaining balance is then amortized for tax purposes at 7% each year using the declining balance method until the expense is fully amortized. A corporation can choose to deduct between $0 to the maximum tax rate of 7% as it is a discretionary expense. If any eligible capital property is sold, 75% of the net proceeds is deducted from the CEC account. When the last eligible capital property in the CEC account is sold and the net proceeds are greater than the CEC account remaining balance, a recapture of the excess amount previously deducted is added as part of the corporation’s taxable income. If the net proceeds less the original cost results in a gain, the gain would be treated as a capital gain and taxed at only 50%.

In the 2014 Federal budget, there were proposed changes to the tax treatment of eligible capital property. It was proposed that instead of adding the expenditures to the CEC account, they would be added to a new capital cost allowance (CCA) class on schedule 8. The expenditures would then be included at 100% (instead of only 75%); however, amortized at only a tax rate of 5% (instead of 7%). These are still proposed changes only and have not been enacted.