Entity Setup
Setting Up Your Entity: Making Clean Tech Tax Credits Work for Your Business
If you're investing in clean tech or electricity generation, understand how to use Canada’s investment tax credits—including proposed content requirements—to maximize value.
By NomadicTax Research Team • 5-8 min read • April 2, 2026
## Overview of Clean Tech & Clean Electricity Investment Tax Credits (ITCs)
The government offers two major refundable ITCs:
| Credit | Eligible Recipients | Credit Rate | Eligible Investments |
|---|---|---|---|
| **Clean Technology ITC** | All businesses | **Up to 30%** | Investments in certain clean electricity generation (solar, wind, etc.), stationary electricity storage, low-carbon heating equipment, non-road zero-emission vehicles, and related infrastructure.([canada.ca](https://www.canada.ca/en/department-finance/news/2026/02/government-launches-consultations-on-potential-domestic-content-requirement-for-clean-technology-and-clean-electricity-investment-tax-credits.html?utm_source=openai)) |
| **Clean Electricity ITC** | Taxable corporations (including Crown corps) after legislation from Budget 2025 | **Up to 15%** | Similar categories: low-emitting electricity generation, storage, and inter-provincial transmission. Legislation still pending Royal Assent.([canada.ca](https://www.canada.ca/en/department-finance/news/2026/02/government-launches-consultations-on-potential-domestic-content-requirement-for-clean-technology-and-clean-electricity-investment-tax-credits.html?utm_source=openai)) |
## Proposed Change: Domestic Content Requirement
In **February 2026**, Finance Canada launched **consultations** on including a **domestic content requirement** in these ITCs—mirroring policies in the U.S.—which would require that certain portions of equipment or materials be sourced domestically to qualify. Stakeholders had until **March 13, 2026** to submit feedback.([canada.ca](https://www.canada.ca/en/department-finance/news/2026/02/government-launches-consultations-on-potential-domestic-content-requirement-for-clean-technology-and-clean-electricity-investment-tax-credits.html?utm_source=openai))
## Structuring Your Entity to Benefit Fully
1. **Plan your supply chain**: If the domestic content rule is enacted, prioritize sourcing components and materials from Canadian suppliers for key assets like solar panels or heat pumps.
2. **Understand project timelines**: The rules (both current and proposed) tie to the date you incur or renounce the eligible expenses. Starting before any new requirement takes effect can lock in favorable terms.
3. **Choose the right entity type**: Both owners of small corporations and large corporations may benefit, but certain non-taxable Crown corporations are included under Clean Electricity ITC (post-legislation). Entities must also ensure they have proper taxability of income to claim refundable credits.
4. **Look out for complementary incentives**: For instance, provincial grants or matching programs may be available. The Budget 2025 and Federal tax expenditure reports list critical mineral flow-through shares, clean tech investment, and SR&ED alignments.([canada.ca](https://www.canada.ca/en/department-finance/services/publications/federal-tax-expenditures/2026/part-2.html?utm_source=openai))
5. **Maintain compliance and documentation**: To support claims, retain invoices, proof of domestic sourcing, performance specs (emissions or efficiency), and ensure projects meet technical definitions in regulations.
## Example: Solar Farm Developer Scenario
Suppose you’re forming a Canadian corporation to develop a 50 MW solar farm:
- If you budget **CAD $10 million** in eligible costs, under the Clean Technology ITC you could claim **30% refundable credit**—i.e. **$3 million**.
- If the Clean Electricity ITC applies (post-legislation), a further **15% credit** may also apply for portions eligible under electricity generation or transmission components.
- If domestic content requirement is adopted, make sure panels, inverters, mounting structures, and installation materials sourced from Canadian manufacturers meet the content thresholds, or risk losing the credit on portions of cost.
## Takeaway
If your business is investing in clean tech or low-carbon infrastructure, there is a strong incentive to act now—project planning, procurement decisions, entity structure, and timing could create or preserve tens or hundreds of thousands in tax savings. Stay engaged in Feedback-consultations, liaise with tax advisors, and don’t treat ITCs as an afterthought—they’re critical parts of your clean growth strategy.