The Clean Technology Investment Tax Credit (ITC)

The Clean Technology Investment Tax Credit (ITC)

Objective: The Clean Technology ITC is aimed at encouraging investment in clean technology property in Canada. It offers financial incentives to taxable Canadian corporations investing in eligible clean technology properties.

Eligibility Criteria:

  1. Eligible Investors:
    • Taxable Canadian corporations.
    • Members of a partnership, where all members are taxable Canadian corporations.
  2. Eligible Property:
    • Renewable Energy Equipment:
      • Solar, wind, and water energy generation equipment.
      • Electricity storage equipment (excluding those using fossil fuels).
    • Heating and Vehicle Equipment:
      • Active solar heating equipment, air-source, and ground-source heat pumps.
      • Non-road zero-emission electric and hydrogen-powered vehicles and related charging/refueling equipment.
    • Geothermal and Solar Energy Equipment:
      • Equipment for generating heat/electricity from geothermal energy (excluding systems extracting both geothermal heat and fossil fuels).
      • Equipment for generating energy from concentrated sunlight.
    • Nuclear Fusion Equipment:
      • Equipment generating energy from nuclear fusion.
    • Waste Biomass Systems (effective November 21, 2023):
      • Systems producing electricity/heat from waste biomass.
  3. Conditions:
    • Property must be new and situated in Canada for exclusive use in Canada.
    • For leased properties, the lessee must be a taxable Canadian corporation or a qualifying partnership.
    • Equipment must be leased in the ordinary course of business.

Tax Credit Details:

  1. Refundable Tax Credit:
    • 30% for property acquired and available for use from March 28, 2023, to December 31, 2033.
    • 15% for property acquired and available for use in 2034.
    • No credit for property acquired and available for use after 2034.
  2. Labour Requirements:
    • Must pay covered workers according to or similar to a collective agreement.
    • At least 10% of labour must be performed by registered apprentices in Red Seal trades.
    • Non-compliance with labour requirements reduces the tax credit rate by 10 percentage points.

Recapture of Tax Credit:

  • The tax credit may be recaptured if within 20 years the property:
    • Is converted to non-clean technology use.
    • Is exported from Canada.
    • Is disposed of by the taxpayer.

Expansion Proposal (2023 Fall Economic Statement):

  • Inclusion of systems producing electricity and/or heat from waste biomass.
  • Effective for eligible property acquired and available for use on or after November 21, 2023.

This structured incentive aims to support the growth and adoption of clean technologies, promoting environmental sustainability and energy efficiency within Canada’s corporate sector.

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