How much funding can be received?

Funds up to 13% of admissible expenses.

What is the deadline to apply?

The deadline to apply is not specified.

Manufacturing and processing profits deduction and zero-emission technology manufacturing deduction

Q: What are Manufacturing and processing profits deduction and zero-emission technology manufacturing deduction's eligibility criterias?

At least 10% of gross revenue must come from manufacturing or processing goods in Canada for sale or lease. The business must be a corporation operating in Canada. Zero-emission technology deduction applies to profits from eligible zero-emission activities.

grant_single|update May 3, 2025

Canada

Corporate tax reduction for Canadian manufacturing and zero-emission technology

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Tax Credits

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Utilities
Manufacturing

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Government of Canada

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The Manufacturing and Processing Profits Deduction and Zero-Emission Technology Manufacturing Deduction provide eligible Canadian corporations with significant tax reductions on manufacturing and processing income, including reduced tax rates as low as 4.5% for small businesses and 7.5% for other corporations engaged in qualified zero-emission technology manufacturing. This program supports activities such as manufacturing energy conversion equipment, air-source heat pumps, zero-emission vehicles, and certain nuclear energy components, aiming to incentivize clean technology and advanced manufacturing in Canada.

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Manufacturing and processing profits deduction (MPPD) applies at a rate of 13% on income not eligible for the small business deduction (SBD).
For zero-emission technology manufacturing, taxable income that would be subject to the 15% general corporate tax rate is taxed at a reduced rate of 7.5%; for income otherwise taxed at the 9% small-business rate, the reduced rate is 4.5% (for tax years 2022–2031).
These reduced tax rates for zero-emission technology profits are temporary and will gradually increase, fully phasing out by tax years starting after 2034.

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Manufacturing or processing goods in Canada for sale or lease.
Production of zero-emission technology, including energy conversion equipment such as solar, wind, water, and geothermal equipment.
Manufacturing of air-source heat pumps used for space or water heating.
Manufacturing activities related to zero-emission vehicles, including production of vehicles, batteries, and charging stations.
Nuclear manufacturing and processing activities, including manufacturing of nuclear energy equipment, processing or recycling of nuclear fuels and heavy water, and manufacturing of nuclear fuel rods.

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$ 495,000

Upgrading facility to manufacture commercial air-source heat pumps

$ 730,000

Manufacturing EV charging stations for public transit infrastructure

$ 1,200,000

Producing components for small modular nuclear reactor facilities

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The applicant must be a corporation deriving at least 10% of its gross revenue from manufacturing or processing goods in Canada for sale or lease.
Eligible activities include manufacturing of energy conversion equipment, air-source heat pumps, zero-emission vehicles or related technology, and certain nuclear manufacturing and processing activities (for tax years starting after 2023).
To qualify as a small manufacturing corporation, the majority of activities during the year must be manufacturing or processing, and total active business income (including associated Canadian corporations) must not exceed $200,000.
The corporation must not engage in activities specifically excluded from manufacturing and processing, such as farming, fishing, logging, construction, resource extraction, etc.
The corporation must not carry on any active business outside Canada during the tax year.

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Corporations involved in manufacturing or processing goods in Canada for sale or lease
Corporations engaged in manufacturing of energy conversion equipment (e.g., solar, wind, water, and geothermal equipment)
Corporations manufacturing air-source heat pumps for space or water heating
Corporations involved in zero-emission vehicle manufacturing, including vehicle, battery, and charging station manufacturing
Corporations conducting nuclear energy equipment manufacturing, nuclear fuel processing or recycling, or manufacturing of nuclear fuel rods (for tax years starting after 2023)

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Companies primarily engaged in farming, fishing, logging, or construction.
Businesses involved in operating oil or gas wells or extracting petroleum or natural gas.
Corporations extracting minerals or processing ore and producing industrial minerals.
Companies carrying on any active business activities outside Canada during the year.

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Corporations operating in Canada

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Verify eligibility criteria

Ensure at least 10% of your corporation's gross revenue comes from eligible manufacturing or processing activities in Canada
Confirm your corporation meets all eligibility criteria for the MPPD or zero-emission technology deduction
Verify if activities include the production of qualified zero-emission technologies, vehicles, batteries, or related components

Determine calculation method

Determine if your corporation qualifies as a small manufacturing corporation based on activity and income limits
Identify the correct methodology for calculating your deduction (simplified for small corporations or detailed formula for others)

Collect necessary documentation

Gather your detailed financial records, including business income, expenses, and eligibility breakdowns
Prepare all supporting documents regarding manufacturing activities and zero-emission technology production

Complete Schedule 27 form

Complete Schedule 27 using the determined calculation method (Part 1 for small corporations, Parts 2 or 14-17 as applicable for others)
Ensure each section relevant to your corporation's activities is accurately filled

Validate application and documentation

Double-check all entered information and supporting documents for accuracy and completeness
Review calculations and eligibility proofs

Transfer deduction to tax return

Enter the deduction amounts as determined in Part 9 of Schedule 27 on line 616 of your corporate tax return
Ensure all required forms are attached and ready for submission

Submit the application

Submit your corporate income tax return with Schedule 27 and all relevant documents to the Canada Revenue Agency
Retain copies of your submission for your records

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The manufacturing and processing profits deduction (MPPD) and zero-emission technology manufacturing deduction are both calculated using Schedule 27 of the tax return.
Different methods are available for calculating eligible profits depending on the corporation’s size and type (small manufacturing corporations vs. others), as outlined in Schedule 27.
The temporary reduced tax rates for zero-emission technology manufacturers will gradually be phased out from 2032 and completely ended for tax years beginning after 2034.
Definitions of eligible manufacturing activities and exclusions are specifically set out in relevant subsections of the Income Tax Act (125.1(3) and 125.2(2)).