A thorough understanding of Canada’s investment tax credits (ITCs) aimed at incentivizing the development of clean technology can support businesses planning for future growth.
Five of Canada’s six clean technology ITCs announced in recent years are currently available; the sixth, an electric vehicle supply chain ITC, remains a proposal at this time.
Since multiple ITCs can be claimed in respect to the same project—although not in respect of the same expense—it’s critical for taxpayers to understand their eligibility and the rate attached to each credit to assess how they can maximize credits. As refundable credits, these ITCs reduce the claimant’s tax payable for the year and the claimant receives any amount by which the credit exceeds its tax payable.
Carbon capture, utilization and storage (CCUS) ITC
Eligible claimants:
Taxable Canadian corporations can apply for this credit.
Credit rate and relevant years
The CCUS ITC can be claimed on up to 60 per cent of eligible expenditures incurred between 2022 and 2035. The credit will then be phased out by 2041.
Eligible expenditures
Qualified carbon capture, transportation, storage and use expenditures related to:
- The storage of captured carbon in dedicated geological storage located in British Columbia, Saskatchewan, Alberta and other jurisdictions as designated.
- The use of captured carbon in producing concrete in Canada or the U.S. using a qualified concrete storage process.
Reporting
- Project plan
- Annual progress reports
- Annual credit claim
- Climate risk disclosure (note: this does not apply to all claimants)
- Knowledge sharing reports (note: this does not apply to all claimants)
- Recapture compliance
Clean technology ITC
Eligible claimants
Taxable Canadian corporations and real estate investment trusts (REITS) can apply for this credit.
Credit rate and relevant years:
The clean technology ITC can be claimed at a rate of 30 per cent of the capital cost of eligible property acquired and available for use between March 28, 2023 and 2033. The credit will then be phased out by 2035.
Eligible property:
Generally, eligible property for the purpose of this ITC includes:
- Equipment used to generate electricity from solar, wind, water energy, electricity, heat from geothermal energy, or waste biomass.
- Stationary electricity storage, active solar heating, concentrated solar energy equipment, small nuclear energy property and air- or ground-source heat pumps.
- Non-road zero-emission vehicles and related charging and refueling equipment.
- Reporting
- Annual credit claim
- Recapture compliance
Clean hydrogen ITC
Eligible claimants
Taxable Canadian corporations can apply for this credit.
Credit rate and relevant years
The clean hydrogen ITC can be claimed up to 40 per cent on the capital cost of eligible property acquired and available for use between March 28, 2023 and 2033. The credit will then be phased out by 2035.
Eligible property
Eligible property for this credit includes equipment related to the production of hydrogen or clean ammonia. The equipment must be used in a qualified project that involves the production of hydrogen from electrolysis, pyrolysis of eligible hydrocarbons or reforming natural gas using carbon dioxide captured in a carbon capture, utilization and storage process.
Reporting
- Project plan
- End-use report (note: this does not apply to all claimants)
- Annual credit claim
- Compliance report
- Operations report
- Recapture compliance
Clean technology manufacturing ITC
Eligible claimants
Taxable Canadian corporations can apply for this credit.
Credit rate and relevant years:
The clean technology manufacturing ITC will have a rate of 30 per cent of the capital cost of eligible property acquired and available for use between 2024 and 2031. The credit will then be phased out by 2035.
Eligible property
Eligible property for this credit includes machinery and equipment, building systems, non-road vehicles and automotive equipment used in:
- The manufacturing of zero-emission vehicles or technology to produce or store renewable energy.
- A qualifying mineral activity producing any or all of the following: lithium, cobalt, nickel, copper, rare earth elements, graphite antimony, gallium, germanium, indium and scandium.
- Reporting
- Annual credit claim
- Recapture compliance
Clean electricity ITC
Eligible claimants
Taxable Canadian corporations and certain other Canadian corporations—including eligible Crown corporations and other tax-exempt entities—can apply for this credit.
Credit rate and relevant years
The credit rate can be claimed at a rate of 15 per cent of the capital cost of eligible property acquired and available for use between April 16, 2024 and 2034.
Eligible property or expenditures
Eligible property for this credit includes equipment used to generate electricity from green sources like solar, tidal and waste biomass, equipment to store energy without the use of fossil fuels, equipment that is part of eligible natural gas energy system or equipment that transmits electricity between provinces and territories.
Qualifying expenditures could also include capital expenditures to refurbish existing facilities.
Reporting:
- System plan (note: this does not apply to all claimants)
- Annual credit claim
- Compliance report (note: this does not apply to all claimants)
- Recapture compliance
Electric vehicle supply chain ITC
Proposed legislation was published in February 2025 for a 10 per cent electric vehicle (EV) supply chain ITC on the cost of buildings involved in the EV supply chain.
To claim the credit, the taxpayer—or a member of a group of related taxpayers—must claim the clean technology manufacturing ITC across all three of the following supply chain segments:
- Electric vehicle assembly.
- Electric vehicle battery production.
- Cathode active material production.
Alternatively, the credit is available if the clean technology manufacturing ITC was claimed in two of the three aforementioned segments—and if the claimant owns at least a qualifying minority interest in an unrelated corporation that claims the clean technology manufacturing ITC in the third segment. This unrelated corporation can claim the credit as well.
If enacted, this credit would apply to property acquired and available for use on or after Jan. 1, 2024. The credit rate will be phased out by 2035.
