Both the Clean Technology Investment Tax Credit (ITC) and Clean Electricity Investment Tax Credit are two out of five tax incentives that the Government of Canada is implementing to encourage investment in clean energy to grow the Canada Clean Economy. These Clean Investment Tax Credits, amounting to over $60 billion over the next decade, will drive green innovation in the private sector, boost economic growth, and create or sustain thousands of quality middle-class jobs.
Although they are two very similar credits there are some differences between them and we will explore both credits to see which one makes the most sense for your situation.
Clean Technology Investment Tax Credit
The Clean Technology Investment Tax Credit is a credit that seeks to incentivize the adoption of clean technologies such as solar, geothermal, heat pumps and zero emission vehicles.
The percentage of the credit varies depending on the year in which these investments are made. It ranges from 30% for investments made between March 28, 2023 and 2033 to 15% for investments made during 2034.
The credit is also subject to several considerations, among them, that the company making the installation complies with specific labour requirements. The credit may also be withdrawn if the technology implemented is exported outside of Canada or withdrawn within 10 years of installation.
Who’s eligible?
The credit is available to all businesses that pay taxes within Canada and that are the first owners of the property. It is also available for mutual fund trusts that acquire eligible property intended for use in a business exclusively in Canada.
What technologies are eligible?
Zero-emission electricity generation: solar, wind, hydro, solar, nuclear reactors.
Non-fossil fuel electricity storage: batteries, flywheels, compressed air, pumped hydro.
Active solar heating, air-source, and ground-source heat pumps.
Geothermal energy equipment for electricity or heat generation.
Non-road zero-emission vehicles: electric or hydrogen, with charging/refueling equipment.
How do I apply?
In order to have access to these credits, the interested party must initiate a process before the Canadian Revenue Agency within a period of up to one year after the equipment was acquired. It is important that the interested party keeps all the documents related to the project such as: receipts, contracts, certificates and invoices.
As part of the process a form must be filled out that includes: Description, location and capital cost of the property; Credit rate and amount claimed and Labour requirements.
Clean Electricity Investment Tax Credit
The Clean Electricity ITC gives a 15% credit on the cost of "eligible property" if labor requirements for wages and apprenticeships are met. If not, the credit drops to 5%. This credit also applies to costs for updating existing eligible property. Many types of equipment qualify for both the Clean Technology ITC and the Clean Electricity ITC.
For partnerships owning property eligible for both credits, Budget 2024 clarifies that partners can each claim their share of either credit, but not both, allowing flexibility in their choice.
Who’s eligible?
Taxable Canadian corporations;
Provincial and territorial Crown corporations (Crown Corporations), subject to certain requirements;
Corporations owned by municipalities;
Indigenous community owned corporations; and
Pension investment corporations.
Eligible property
Equipment used to generate electricity from solar, wind or water energy
Nuclear energy equipment
Geothermal energy equipment
Stationary Electricity Storage equipment
Interprovincial electricity transmission systems
Eliqible equipment that is part of an eligible natural gas energy system
Recapture
Budget 2024 indicates that the recapture requirements for the Clean Electricity ITC will align with those for the Clean Technology ITC. Specifically, if the claimant converts the property to an ineligible use, exports it from Canada, or disposes of it within 10 years of acquisition and ITC entitlement, the Clean Electricity ITC may be subject to recapture.
Coming in force
The Clean Electricity ITC applies to eligible property acquired and available for use from Budget Day 2024 (April 16, 2024) until 2035. To qualify, the property must not have been used prior to acquisition and must not be part of a project that began construction before March 28, 2023.
UpGreen's Expertise
UpGreen is here to help your business capitalize on the significant tax credits available through the Clean Technology ITC and Clean Electricity ITC. Our services, which include solar panel installations, battery storage solutions, and energy consultations, are designed to make your transition to clean energy seamless and cost-effective. With the Clean Technology ITC offering a 20-30% refundable tax credit for investments in clean technologies, and the Clean Electricity ITC providing a 10-15% refundable tax credit for clean electricity projects, we can help you reduce costs and enhance sustainability. Trust our experienced team to assist you throughout the application process, ensuring you gain the full advantage of these government incentives.
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