Clean Economy Investment Tax Credits
Federal Tax Incentives for Canada's Clean Economy
Canada’s Investment Tax Credits (ITCs) are designed to encourage businesses to invest in clean technology, clean manufacturing, carbon capture, and clean hydrogen. For eligible investments, these federal tax credits can return a significant portion of qualifying capital costs to businesses, helping reduce the cost of major clean economy investments and supporting Canada's transition toward a lower-carbon economy.
The Clean Economy ITCs are administered by the Canada Revenue Agency (CRA), with Natural Resources Canada (NRCan) providing technical and project-related support for certain credits. Depending on the credit and the investment, eligible businesses may be able to recover a substantial portion of the cost of qualifying property through a refundable tax credit.
Which Clean Economy ITC Could Apply to Your Business?
The Clean Economy Investment Tax Credit framework includes several incentives designed to support different types of clean economy investments. Explore the ITCs below to learn more about eligibility, qualifying investments, credit rates, application requirements, and how EVAMAX can help.
Clean Technology Investment Tax Credit
The Clean Technology Investment Tax Credit (CTITC) is a refundable tax credit for eligible investments in clean technology property in Canada.
The credit can provide up to 30% of the capital cost of qualifying clean technology property acquired and available for use from March 28, 2023 through December 31, 2033. The rate is reduced to 15% for qualifying property available for use in 2034.
Eligible investments can include technologies such as:
- Solar, wind and water energy generation equipment
- Geothermal energy equipment
- Active solar heating equipment
- Air-source and ground-source heat pumps
- Non-road zero-emission vehicles and related charging or refueling equipment
- Waste biomass electricity and heat generation equipment
- Electrical energy storage property
- Pumped hydroelectric energy storage
- Certain small nuclear energy property
The CTITC is intended to help businesses reduce the capital cost of adopting clean technologies and investing in lower-emission energy systems.
Clean Technology Manufacturing Investment Tax Credit
The Clean Technology Manufacturing Investment Tax Credit (CTM ITC) is designed to encourage businesses to invest in Canada's clean technology manufacturing and processing sector.
The credit can support eligible investments in machinery and equipment used for the manufacturing or processing of certain clean technologies, as well as the extraction, processing or recycling of certain critical minerals.
For eligible property, the credit can provide a significant refundable tax incentive for businesses making investments in clean technology manufacturing capacity in Canada.
Eligible activities can include the manufacturing and processing of certain:
- Clean energy equipment
- Zero-emission transportation equipment
- Energy storage equipment
- Clean technology equipment
- Nuclear energy equipment
- Critical Minerals
The CTM ITC can help businesses reduce the cost of expanding or establishing Canadian manufacturing and processing operations that support the clean economy.
Carbon Capture, Utilization and Storage Investment Tax Credit
The Carbon Capture, Utilization and Storage Investment Tax Credit (CCUS ITC) provides a refundable tax credit for eligible investments in carbon capture, utilization and storage projects.
The incentive is intended to encourage businesses to invest in technologies and infrastructure that capture carbon dioxide before it is released into the atmosphere and either use it in eligible applications or store it.
Depending on the type of eligible property and when it is acquired and available for use, the CCUS ITC can provide a substantial tax incentive for qualifying projects.
Eligible investments can include certain equipment used for:
- Capturing carbon dioxide
- Transporting captured carbon dioxide
- Storing captured carbon dioxide
- Utilizing captured carbon dioxide in eligible applications
- Supporting the operation of eligible CCUS systems
The credit can be particularly relevant to businesses in emissions-intensive industries that are investing in large-scale carbon management infrastructure.
Clean Hydrogen Investment Tax Credit
The Clean Hydrogen Investment Tax Credit (CH ITC) is a refundable tax credit for eligible investments in clean hydrogen production and certain clean ammonia equipment.
For eligible property acquired and available for use between March 28, 2023 and December 31, 2033, the credit can provide up to 40% of the capital cost, depending on the expected carbon intensity of the hydrogen produced.
The credit is designed to provide greater support to hydrogen projects with lower expected carbon intensity.
Eligible property can include equipment used for:
- Producing hydrogen through electrolysis of water
- Producing hydrogen from eligible hydrocarbons
- Producing clean ammonia
- Supporting hydrogen and ammonia production
- Certain dual-use electricity and heat systems
- Certain dual-use hydrogen and ammonia equipment
- Project support equipment
Because the available credit rate is directly connected to the project's expected carbon intensity, businesses need to consider the Clean Hydrogen ITC during the planning and design stages of a project.
Which Investment Tax Credit Is Right for Your Business?
Determining which Clean Economy ITC applies is not always straightforward.
A single clean energy or industrial project can contain different types of equipment, and the eligibility of each investment may depend on factors such as:
- The type of property being acquired
- How the property will be used
- Where the property is located
- When the property is acquired and becomes available for use
- The structure of the project
- Labour requirements
- Carbon intensity, where applicable
- Whether government or other financial assistance has been received
- Whether another Clean Economy ITC applies to the same property
Generally, only one Clean Economy ITC can be claimed for the same eligible property. However, different eligible properties within the same overall project may potentially qualify for different ITCs.
This makes it important to evaluate a project as a whole before making major investment decisions.
How Much Could Your Business Recover?
The value of a Clean Economy ITC depends on the type of investment, the amount of eligible capital expenditure, when the property becomes available for use, and the specific requirements of the applicable credit.
For some investments, the available credit can represent a substantial percentage of the property's capital cost.
For example, an eligible investment of $10 million could potentially generate millions of dollars in refundable tax credits, depending on the applicable ITC and eligibility requirements.
Because these incentives are refundable, qualifying businesses may be able to receive the credit even where the tax credit exceeds their taxes otherwise payable, subject to the applicable rules.
The earlier an ITC is considered, the more opportunity a business may have to structure and document its investment appropriately.
Tax incentives are only one part of the funding landscape.
Depending on the company's location, size, activities and project objectives, additional government programs may have more support to offer. Grants such as:
- NRC IRAP — Clean Technology (formerly SDTC)
- NRCan — Clean Energy for Rural and Remote Communities
- Ontario Bioresearch Sector Challenge Fund
- Emissions Reduction Alberta (ERA) — Industrial Transformation
- Canadian Agricultural Partnership (CAP) — Agri-Innovation
Program availability and eligibility requirements can change frequently, making it important to assess available programs based on the company's specific project and circumstances.
How EVAMAX Can Help
Navigating Canada's Clean Economy Investment Tax Credits can be complex. Businesses making significant investments in clean technology, manufacturing, carbon capture or hydrogen production may be eligible for substantial federal incentives, but determining what qualifies and how to properly claim the credit requires careful analysis.
EVAMAX helps Canadian businesses identify and pursue available tax incentives and funding opportunities.
Our team can help you assess your planned investment, identify the Clean Economy ITC that may apply, review potential qualifying expenditures, and navigate the requirements involved in preparing a claim.
Whether you are purchasing clean technology equipment, expanding clean manufacturing operations, developing a carbon capture project, or investing in clean hydrogen production, we can help you understand where the opportunity may be and what steps are required to pursue it.
Planning a Clean Economy Investment?
Don't wait until your project is complete to determine whether you may have been eligible for a significant federal tax incentive.