Investment Tax Credits (ITC) for Qualified Property
A corporation can claim an investment tax credit (ITC) to reduce Part I tax that it would otherwise have to pay, or in some cases this credit may be fully or partially refundable.
You can earn ITCs on qualified property acquired mainly for use in designated activities in the Atlantic region.
Offered by Canada Revenue Agency
Amount
The ITC rate for qualified property is 10% of the cost of acquiring qualified property (capital cost first reduced by any government or non-government assistance received or receivable)
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Who can apply
A corporation is not considered to have acquired a property or made capital expenditures for earning an investment tax credit until the property becomes available for use.
You can earn ITCs on qualified property acquired mainly for use in designated activities in the Atlantic region.
Designated activities include, among others, the following:
- manufacturing or processing goods for sale or lease
Eligible machinery and equipment acquired after 2015 and before 2026 for use in Canada mainly for the manufacturing and processing of goods for sale or lease is included in class 53. These assets are qualified property for the ITC.
- logging
- farming or fishing
- storing grain
- harvesting peat
In addition, the following rules apply to certain corporations that lease qualified properties such as prescribed machinery and equipment or prescribed energy generation and conservation property to lessees who use the property in any of the designated activities:
- For a corporation with a principal business of leasing property, lending money, or purchasing conditional sales contracts, accounts receivable, or other obligations, property acquired for the purposes of leasing it in the ordinary course of carrying on business in Canada is considered qualified property.
- For a corporation with a principal business of manufacturing property that it sells or leases, a property is considered qualified property only if the corporation manufactures it and leases it in the ordinary course of its business in Canada.
- For a corporation with a principal business of selling or servicing property, a property is considered qualified property only if it is a type of property that the corporation sells or services, and the property is leased in the ordinary course of carrying on business in Canada.
About the funding
A corporation can claim an investment tax credit (ITC) to reduce Part I tax that it would otherwise have to pay, or in some cases this credit may be fully or partially refundable.
A corporation earns ITCs by applying a specified percentage to the cost of acquiring certain property (investments) or on certain expenditures. However, you first have to reduce the capital cost of the property or the expenditure by any government or non-government assistance you received or will receive for that property or the expenditure. Any goods and services tax/harmonized sales tax (GST/HST) input tax credit or rebate received for property acquired is considered government assistance.
The ITC rate for qualified property is 10%.
You can deduct the full amount of ITC against federal Part I tax payable. If you are claiming an ITC for a depreciable property, reduce the capital cost of the property in the next tax year by the amount of this year's ITC. For more information, see Schedule 8, Column 3 – Cost of acquisitions during the year.
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You can carry forward certain ITCs not previously deducted for 20 years, or carry them back 3 years, to reduce Part I tax. You can only carry back ITCs to a previous year if you cannot deduct them in the year you earn them.
Special rules restrict the carryforward and carryback of ITCs following an acquisition of control.
The following investments and expenditures earn an ITC:
A. the cost of acquiring qualified property
A. Qualified property is defined in subsection 127(9). It includes new prescribed buildings, prescribed machinery, and equipment or prescribed energy and conservation property acquired during the year to use in certain activities in Newfoundland and Labrador, Nova Scotia, Prince Edward Island, New Brunswick, the Gaspé Peninsula, and prescribed offshore regions (Atlantic region).
Similar programs
| Program | Type | Amount | Status |
|---|---|---|---|
| Accelerated Investment Incentive | Tax Credit | no fixed amount | Open |
| Air Quality Improvement Tax Credit | Tax Credit | no fixed amount | Open |
| Clean Technology Investment Tax Credits (ITC) | Tax Credit | no fixed amount | Open |
| Full Expensing for Clean Energy Investments | Tax Credit | 100% first-year deduction for eligible Class 43.1 clean energy equipment acquired after 2024 and available for use before 2030 | Open |
