Clean Technology (CT) Investment Tax Credit (ITC)
Canada
Offer up to 30% refundable credit for capital investments in new clean technologies in Canada
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Tax Credits
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- Canada Revenue Agency (CRA)
- Natural Resources Canada (NRCAN)
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The Clean Technology Investment Tax Credit (CII) is a refundable tax credit that offers up to 30% for capital invested in adopting and operating new clean technology assets in Canada between March 28, 2023, and December 31, 2034. Eligible activities include investments in equipment for solar, wind, and hydroelectric power generation, energy storage, geothermal systems, and zero-emission non-road vehicles.
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The CII for clean technologies is a refundable tax credit for capital invested in the adoption and use of new clean technology assets in Canada between March 28, 2023, and December 31, 2034.
To apply for this credit, you must meet the following eligibility criteria:
- A taxable Canadian corporation (including a taxable Canadian corporation that is a member of a partnership)
- A mutual fund trust that is a real estate investment trust (including such a trust that is a member of a partnership)
- The asset must be eligible clean technology property
- If renting the asset, it must be rented to a taxable Canadian corporation or a mutual fund trust that is a real estate investment trust, or a partnership where all members are taxable Canadian corporations
- The rented asset must be used in the normal course of business in Canada by the taxpayer whose primary business includes one or more specified activities
- Employers must meet labor requirements to avoid a reduced credit rate
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Yes, there are eligible types of companies for the Clean Technology Investment Tax Credit (CII). Eligible companies include Canadian taxable corporations and certain Real Estate Investment Trusts (REITs).
- Canadian taxable corporation (including those that are members of a partnership)
- Real Estate Investment Trust (REIT), including those that are members of a partnership
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The grant is available for investments in Canada in certain provinces and territories where the eligible clean technology properties are located.
- Canadian taxable corporations
- Mutual fund trusts that are real estate investment trusts
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- Step 1: Determine Eligibility
- Ensure that you are a taxable Canadian corporation or a mutual fund trust that is a real estate investment trust.
- If applicable, make the choice to meet labor requirements to avoid a reduced credit rate.
- Step 2: Gather Required Information
- Collect all necessary technical and scientific information on eligible clean technology properties from Natural Resources Canada (NRCan).
- Prepare a summary of the clean technology investments for the year, including the calculation of the CII, allocated amounts to partnerships, and partnership business numbers (BN).
- Prepare a summary of CII recoveries for the year, including the total amount of recoveries, the recovered CII from each partnership, and partnership business numbers (BN).
- Step 3: Filing the Return
- File the CII for Clean Technologies on your corporation's or trust's income tax return (T2 for corporations, T3 for trusts) by the filing deadline.
- Attach the requisite summary information and calculations to your tax return.
- Step 4: Additional Documentation
- If the specific form detailing the CII calculation is not available, follow the prescribed guidelines to provide the necessary documentation with your filing.
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The Investment Tax Credit (ITC) for Clean Technologies supports the adoption and use of specified clean technology assets in Canada from March 28, 2023, to December 31, 2034, for eligible businesses.
- Rate of the ITC can be up to 30% for assets available from March 28, 2023, to December 31, 2033.
- Rate of the ITC drops to 15% for assets available in 2034.
- Available to taxable Canadian corporations and certain types of trusts.
- Cannot be combined with other specific ITCs for the same asset, but multiple ITCs can be applied to the same project for different assets.
- Additional technical information and support can be obtained from Natural Resources Canada (NRCan).
Apply to this program
Investment Tax Credit (ITC) for Clean Technologies
The Investment Tax Credit (ITC) for Clean Technologies is a refundable tax credit designed to incentivize investments in new clean technology assets in Canada, available from March 28, 2023, to December 31, 2034. Companies that adhere to specific labor requirements can benefit from a higher credit rate of up to 30%, while those that do not comply will receive a reduced rate.
Understanding the Investment Tax Credit (ITC) for Clean Technologies
The Investment Tax Credit (ITC) for Clean Technologies is a significant measure introduced by the Canadian government to promote the adoption and use of clean technology assets. This initiative is part of Canada's broader strategy to transition towards a more sustainable and environmentally friendly economy. The ITC for Clean Technologies offers a refundable tax credit for the capital invested in acquiring and utilizing new clean technology assets within Canada. This credit is available for a specified period, from March 28, 2023, to December 31, 2034.
Eligibility Criteria
To be eligible for the ITC for Clean Technologies, applicants must meet specific criteria:
- Canadian Taxable Corporations: The applicant must be a Canadian taxable corporation, including those that are members of partnerships. This ensures that only entities contributing to the Canadian economy are eligible.
- Real Estate Investment Trusts (REITs): Investment trusts that qualify as Real Estate Investment Trusts (REITs) under Canadian tax law, including those that are members of partnerships, are also eligible for this credit.
Employers who opt to meet specific labor requirements related to prevailing wages and apprentices can avoid receiving a reduced credit rate. These labor requirements ensure that the benefits of the credit are extended to the workforce involved in the clean technology projects.
Credit Rates and Conditions
The ITC for Clean Technologies offers varying credit rates based on certain conditions:
- Up to 30%: For eligible assets acquired and available for use from March 28, 2023, to December 31, 2033, the credit rate can reach up to 30% of the capital cost of the clean technology assets.
- Up to 15%: For assets acquired and available for use in 2034, the credit rate drops to a maximum of 15%. This rate reduction is part of a gradual phase-out process to encourage early adoption of clean technologies.
It's important to note that the credit will no longer be available after 2034, emphasizing the urgency of investing in clean technologies sooner rather than later.
Types of Eligible Clean Technology Assets
The ITC for Clean Technologies is applicable to a range of clean technology assets, including but not limited to:
- Electricity Production: Equipment that produces electricity from solar, wind, and hydro sources.
- Energy Storage: Stationary electricity storage equipment that does not use fossil fuels, such as batteries and pumped hydroelectric storage.
- Heating Equipment: Active solar heating equipment, air source heat pumps, and geothermal heat pumps.
- Zero-Emission Vehicles: Non-road zero-emission vehicles and associated charging and refueling equipment primarily used for these vehicles.
- Geothermal Energy Equipment: Equipment exclusively used to produce electrical or thermal energy, or both, solely from geothermal energy, provided that it’s not part of a system extracting fossil fuels for sale.
- Solar Concentrated Power: Equipment used for solar concentrated power generation.
- Small Modular Nuclear Reactors: Equipment and technology related to small modular nuclear reactors.
For detailed technical information and classification of eligible clean technology assets, applicants can refer to resources provided by Natural Resources Canada (NRCan).
Additional Fiscal Incentives
In addition to the ITC for Clean Technologies, certain clean technology assets may qualify for other fiscal incentives, such as the Accelerated Capital Cost Allowance (ACCA). These incentives further enhance the financial attractiveness of investing in clean technologies by allowing faster depreciation of eligible assets.
Filing for the Credit
To claim the ITC for Clean Technologies, eligible entities must follow specific steps:
- Include in Tax Returns: The credit must be claimed within the corporation's or trust's income tax return (T2 for corporations or T3 for trusts).
- Meeting Deadlines: The tax return must be filed by the appropriate deadline for tax returns. The Canada Revenue Agency (CRA) may accept late submissions if provided within one year of the original deadline.
- Documentation: Applicants must provide a detailed summary of the ITC claim, including calculations, amounts attributed to each partnership (if applicable), and information about the clean technology assets.
Until the final form detailing the ITC calculation becomes available, applicants should include relevant information as per current guidelines. This includes data on the clean technology assets, their type, cost, location, and compliance with labor requirements.
Avoiding Reduced Credit Rates
To benefit from the full credit rate, applicants must adhere to specific labor requirements. These include:
- Prevailing Wages: Ensuring that workers involved in the clean technology projects receive prevailing wages.
- Apprenticeship Opportunities: Providing opportunities for apprentices in clean technology projects.
If the employer commits to these labor requirements but fails to comply, there will be financial penalties. Applicants who do not choose to meet these labor requirements will have their credit rate reduced by 10 percentage points. These labor requirements apply to work undertaken from November 28, 2023, onwards.
Combining ITCs
While multiple ITCs for clean technologies can be claimed for the same project (given that different types of eligible clean technology assets are involved), individual assets cannot be claimed under multiple ITCs. For example, an asset cannot be claimed under both the ITC for Clean Technologies and the ITC for Carbon Capture, Utilization, and Storage (CCUS).
Applicants can, however, claim both the ITC for Clean Technologies and the Atlantic Investment Tax Credit if their project qualifies for both credits.
Leased Assets Requirements
If the clean technology asset is leased to another entity, additional requirements must be met:
- Taxable Canadian Entity: The asset must be leased to a taxable Canadian corporation or a qualifying REIT.
- Ordinary Course of Business: The leasing must occur within the regular course of the leasing company’s business operations in Canada.
The primary business of the lessor must involve activities such as selling or maintaining such assets, leasing, lending money, or purchasing conditional sales contracts, among others.
Conclusion
The Investment Tax Credit (ITC) for Clean Technologies represents a crucial incentive for Canadian businesses to invest in clean technology assets. By offering a refundable credit and encouraging compliance with labor standards, the Canadian government aims to accelerate the adoption of environmentally friendly technologies, driving the nation towards a sustainable future. Businesses looking to leverage this credit must navigate the eligibility criteria, credit rates, and additional requirements to maximize their benefits.
