Clean Technology Investment Tax Credit (ITC)
The Clean Technology Investment Tax Credit (CITP) encourages the adoption of clean technology assets in Canada. It applies to investments made between 28 March 2023 and 31 December 2034. Here's what you need to know to take full advantage.
Who can apply for a CITP?
Taxable Canadian corporations and mutual fund trusts that are real estate investment trusts are eligible for this credit.
What goods are eligible?
To be eligible, goods must be new, used exclusively in Canada and belong to one of the following categories:
Clean energy production equipment;
Low-emission heat-producing equipment;
Fossil-free stationary electricity storage facilities;
Zero-emission1 non-road vehicles (e.g. forklifts).
How much is the credit?
The CITP offers a 30% credit on the cost of an eligible asset. The rate drops to 15% for assets commissioned in 2034 and a 10% reduction applies if labour requirements are not met, with possible penalties for unjustified claims of the 30% rate.
Good news:Zero emission off-road vehicles and certain environmentally friendly heating equipment automatically benefit from the 30% rate.
Labour requirements
To qualify for the maximum rate, the company must :
1. Meet salary requirements
"Covered workers" must be paid in accordance with an eligible collective agreement or at an equivalent level.
2. Employ apprentices
At least 10% of the work performed by Red Seal-certified workers must come from registered apprentices.
Red Seal trades include, but are not limited to: electricians, plumbers, mechanics, welders, heavy equipment operators, carpenters, etc.
Credit recovery: when do you have to repay?
The CITP must be repaid when a clean technology asset, acquired in the previous year or 10 years and for which a credit was obtained, is subsequently used for a non-eligible purpose, exported or disposed of.
Exception: no refund if the property is transferred to a related Canadian corporation that continues to use it for clean technology purposes.
Compliance rules to be aware of
The credit becomes taxable in the year following its claim, except for partnerships where it is taxable in the same year. A tenant can never claim the CITP for a rented property.
The credit must be claimed within 18 months of the end of the year in which the asset became available for use. Expenses must be paid within 180 days of the end of the tax year, otherwise they will be carried forward.
Major financial leverage for a low-emission future
CITP reduces the cost of modernisation projects, but its interaction with other credits and subsidies requires careful analysis. Because of the many conditions and exceptions, careful optimisation and a clear understanding of the rules are essential before submitting an application.
Need help optimising your projects and tax credits? Contact our tax team, we're here to guide you.
1A zero-emission off-road vehicle is an all-electric or hydrogen-powered off-road vehicle used in a commercial or industrial context.