During a time when usability and environmental awareness are becoming key issues for industries worldwide, Bill C-59 brings into effect serious changes to the manufacturing sector in Canada. This blog will discuss how Bill C-59 will affect manufacturers and dive deeper into the details of the Clean Technology Investment Tax Credit and what it is able to do for the benefit of the industry.
Bill C-59’s Impact on Manufacturing
1. Carbon Capture, Utilization, and Storage (CCUS) Equipment
One of the standout points of Bill C-59 is the refundable investment tax credit for qualified CCUS equipment. This incentive encourages manufacturers in the filing of technologies that reduce carbon emissions to keep their operations current with global sustainability goals.
2. Clean Technology Equipment
Bill C-59 also provides for a refundable investment tax credit to businesses that invest in clean technology equipment, such as battery storage, to spur industry in the right direction toward more environmental sustainability of its manufacturing processes.
3. Labour Requirements
For the qualification to receive new tax credits, manufacturers have to meet certain labour requirements. This ensures that in the move to clean technology, labour practices are considerate, and they complement technological advancement with social responsibility.
4. Zero-Emission Technology
The bill extends the three-year phase-out period and expands eligible activities for reduced tax rates on zero-emission technology manufacturers. This extension allows manufacturers to have extra time to continue to enjoy low taxes while developing and producing sustainable technologies.
5. Hybrid Mismatch Rules
Bill C-59 implements rules as suggested by the OECD and G20 on cross-border tax avoidance structures. This affects manufacturers who have operations across international borders; this means proper tax practices and reduces the possibility of tax avoidance.
6. Intergenerational Business Transfers
The legislation ensures the anti-surplus stripping rule only applies to intergenerational business transfers that are genuine, therefore targeting family-owned manufacturing businesses concerned about maintaining business integrity across generations through succession plans.
7. Dividend Received Deduction
The bill eliminates the ability for Canadian financial institutions to deduct dividends received on certain shares. This could impact manufacturers with significant investments in these institutions, potentially affecting their financial planning and strategies.
8. Climate Action Incentive Payments
Bill C-59 increases the rural supplement for Climate Action Incentive payments from 10% to 20%. This provides extra support to manufacturers in rural areas, encouraging them to embrace more sustainable practices.
9. Digital Services Tax Act
A new 3% tax will be applied to digital services revenue for businesses that meet specific criteria. While this tax primarily targets digital services, manufacturers with substantial digital income might also feel the impact.
The Clean Technology Investment Tax Credit: A Closer Look
Financial Incentives for Green Investments
A standout feature of Bill C-59 is the Clean Technology Investment Tax Credit, which offers a refundable tax credit to help manufacturers invest in clean technology equipment. Covering 30% of eligible costs, this tax credit reduces the expense of adopting eco-friendly technologies, provided the investment is made in new equipment after March 28, 2023.
Promotes Sustainability
This tax credit supports manufacturers in investing in renewable energy, energy storage, and other clean technologies, aligning their practices with consumer and regulatory expectations for environmentally responsible production.
Compliance with Labour Requirements
To be eligible for this tax credit, manufacturers must meet specific labour standards. This ensures that green investments also uphold fair and responsible labour practices, blending environmental and social responsibility.
Long-Term Cost Savings
Investing in clean technology doesn’t just help the planet; it can also save money over time. By improving energy efficiency and cutting operational costs, manufacturers can boost their competitiveness, making sustainability a smart financial move.
Enhanced Market Position
Embracing clean technologies allows manufacturers to stand out by meeting the increasing demand for sustainable products. This not only improves market position but also builds a reputation for environmental responsibility.
Bill C-59 introduces several updates for the manufacturing sector, focusing on financial incentives and regulatory shifts towards sustainability, ethical practices, and financial responsibility. The Clean Technology Investment Tax Credit, in particular, provides key benefits by supporting green investments, promoting sustainable manufacturing, and requiring compliance with fair labour practices. For manufacturers, seizing these opportunities will be essential for long-term success and sustainability in a rapidly evolving industry landscape.
Learn more at: https://www.parl.ca/DocumentViewer/en/44-1/bill/C-59/third-reading
