Canada's Green Economy Push: Overview of Clean Economy Investment Tax Credits
Key Ideas
  • Multiple refundable investment tax credits introduced by the Canadian government aim to boost capital investment in clean economy projects.
  • Taxpayers can claim different clean economy ITCs for the same project if it involves various eligible properties.
  • Certain restrictions apply for businesses planning to claim other ITCs under the Income Tax Act, like the Atlantic investment tax credit.
  • Detailed requirements and eligibility criteria vary for each clean economy ITC, with prescribed forms and guidance provided by the CRA.
Since 2022, Canada has been on a path to a greener economy with the implementation of various refundable investment tax credits (ITCs) to stimulate capital investment in clean economy projects. These incentives, recently enacted into law, offer tax benefits to eligible taxpayers who invest in specific clean technology and manufacturing projects. Taxpayers can only claim one clean economy ITC for the same eligible property, but multiple ITCs may be claimed for a project incorporating different types of eligible property. There are separate clean economy ITCs in Canada, each with distinct requirements and timelines. One of these is the Clean Technology Investment Tax Credit, which applies to property acquired between March 28, 2023, and December 31, 2034. Another is the Clean Technology Manufacturing Investment Tax Credit, available for property acquired after January 1, 2024, and phased out from 2032 to 2034. A significant focus is on the Clean Hydrogen Investment Tax Credit, targeting investments in hydrogen production projects. This credit supports projects producing the cleanest hydrogen, offering up to 40% of the capital cost of eligible property until its full elimination in 2035. To claim these ITCs, eligible Canadian corporations and partnerships must meet specific criteria and file prescribed forms with the CRA. Each ITC has its eligibility details, requirements, and phasing out timelines. Further guidance is available from the CRA and professional advisors for a detailed understanding of these tax incentives.
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