What property qualifies

In order to qualify, in addition to other limitations, CTM property of the taxpayer must:

Be property that is situated in and intended for use exclusively in Canada
Not have been used, or acquired for use or lease, for any purpose whatever before it was acquired by the taxpayer
Meet additional leasing requirements if the property is leased to another person or partnership
Not be an excluded property
Be included in certain capital cost allowance (CCA) classes, with certain qualifications and exceptions, that generally fall in the following categories:
- Machinery and equipment used for manufacturing or processing, such as industrial robots used to manufacture electric vehicles or vats used to process cathode active materials
- Certain tangible property attached to buildings and other structures used for manufacturing or processing or that is required for machinery or equipment, such as ventilation systems used to remove chemical fumes or specialized electrical wiring used to provide power to solar panel manufacturing equipment
- Certain property used for mineral extraction and processing, such as equipment used to crush rock containing copper ore or kilns used to calcinate nickel ore
- Certain specialized tooling, such as moulds used to cast copper ingots at smelters or cutting parts of a machine used to cut solar cells
- Non-road vehicles and automotive equipment, such as electric vehicles designed for use in factories or hydrogen-powered vehicles designed for extracting rock from mine sites

If you lease the CTM property to another entity

If you lease the property to another entity:

The entity must be a taxable Canadian corporation or a partnership in which all the members are taxable Canadian corporations and
You must lease the CTM property in the ordinary course of carrying on your business in Canada, where the principal business is any, or a combination, of the following:
- Selling or servicing property of that type
- Leasing property
- Lending money
- Purchasing conditional sales contracts, accounts receivable, bills of sale, chattel mortgages or hypothecary claims on movables, bills of exchange or other obligations representing all or part of the sale price of merchandise or services

CTM use

CTM property must be used in one of the following 2 ways:

All or substantially all (90% or more) for activities described in paragraph (a) or (c) of the definition qualified zero-emission technology manufacturing activities in section 5202 of the Income Tax Regulations
In a qualifying mineral activity producing all or substantially all (90% or more) qualifying materials

Determination of capital cost

The capital cost of property generally means the taxpayer's full cost of acquiring the property and includes:

Legal, accounting, engineering or other fees incurred to acquire the property
Site preparation, delivery, installation, testing, or other costs incurred to put the property into service
In the case of a property a taxpayer manufactures for their own use, material, labour and overhead costs reasonably attributable to the property, but not any profit which might have been earned had the asset been sold

The capital cost of CTM property must be reduced by the amount of any government assistance or non-government assistance received by the taxpayer in or before the tax year in which the property became available for use, or an amount the taxpayer is entitled to or can reasonably be expected to receive in that year and that would be government assistance or non-government assistance if it were received by the taxpayer in the year.

Amounts of assistance that are repaid in a tax year or are no longer expected to be received in the year may be added to the capital cost of CTM property for determining the CTM ITC for the year.

If any part of the capital cost of a taxpayer’s CTM property is unpaid on the day that is 180 days after the end of the taxation year of a taxpayer in which the property became available for use, that part is excluded from the capital cost of the property, and it will be added to the capital cost of the property at the time it is paid.

CTM property means property of a taxpayer, other than excluded property,

(a) situated in Canada and intended for use exclusively in Canada;
(b) that has not been used, or acquired for use or lease, for any purpose whatever before it was acquired by the taxpayer;
(c) that, if it is to be leased by the taxpayer to another person or a partnership, is
- (i) leased to a qualifying taxpayer or a partnership all the members of which are qualifying taxpayers, and
- (ii) leased in the ordinary course of carrying on a business in Canada by the taxpayer whose principal business is selling or servicing property of that type, or whose principal business is leasing property, lending money, purchasing conditional sales contracts, accounts receivable, bills of sale, chattel mortgages or hypothecary claims on movables, bills of exchange or other obligations representing all or part of the sale price of merchandise or services, or any combination thereof; and
(d) described in Schedule II to the Income Tax Regulations that
- (i) is included in
  - (A) paragraph (a) or (c) of Class 8,
  - (B) paragraph (a) of Class 43,
  - (C) Class 43.1 that would otherwise be included in any of clauses (A), (B) and (E),
  - (D) Class 43.2 that would otherwise be included in clause (C), or
  - (E) Class 53,
- (ii) is included in
  - (A) paragraph (b) of Class 8, or would be included in paragraph (b) of Class 8 if that paragraph were read without reference to the word “solely” and if the word “building” were read as “structure”,
  - (B) Class 43.1 that would otherwise be included in clause (A), or
  - (C) Class 43.2 that would otherwise be included in clause (B),
- (iii) is included in
  - (A) subparagraph (k)(i) of Class 10, provided that the property would otherwise be in paragraph (a) or (c) of Class 8,
  - (B) subparagraph (k)(ii) of Class 10,
  - (C) paragraph (b) of Class 41, or in paragraph (b) of Class 41.2, that would otherwise be included in clauses (A) or (B),
  - (D) paragraph (b) of Class 43,
  - (E) Class 43.1 that would otherwise be included in any of clauses (A) to (D), or
  - (F) Class 43.2 that would otherwise be included in clause (E),
- (iv) is included in paragraph (d) or (j) of Class 12,
- (v) is included in
  - (A) paragraph (a) or (e) of Class 10 or Class 38, but excluding any property that is designed or adapted for use on streets and highways, or
  - (B) Class 56, or
- (vi) would be described in any of subparagraphs (i) to (v) if the word “mine” in Schedule II of the Income Tax Regulations were read as “mine, well or tailing pond”.

Qualified zero-emission technology manufacturing activities, described in paragraphs (a) or (c) means:

(a) qualified activities that are
- (i) performed in connection with the manufacturing or processing of
  - (A) solar energy conversion equipment, including solar thermal collectors, photovoltaic solar arrays and custom supporting structures or frames, but excluding passive solar heating equipment,
  - (B) wind energy conversion equipment, including wind turbine towers, nacelles and rotor blades,
  - (C) water energy conversion equipment, including hydroelectric, water current, tidal and wave energy conversion equipment,
  - (D) geothermal energy equipment,
  - (E) equipment for a ground source heat pump system,
  - (E.1) air-source heat pump equipment designed for space or water heating,
  - (F) electrical energy storage equipment used for storage of renewable energy or for providing grid-scale storage or other ancillary services, including battery, compressed air and flywheel storage systems,
  - (G) equipment used to charge, or to dispense hydrogen to, property included in clause (J),
  - (H) equipment used for the production of hydrogen by electrolysis of water,
  - (I) equipment that is a component of property included in clauses (A) to (H) or (L) to (O), if such equipment is purpose-built or designed exclusively to form an integral part of that property,
  - (J) property that
    - (I) would be a zero-emission vehicle (as defined in subsection 248(1) of the Act if that definition were read without reference to its paragraphs (b) to (d)), or
    - (II) is described in subparagraph (a)(i) of Class 56 of Schedule II, and
  - (K) integral components of the powertrain of property included in clause (J), including batteries or fuel cells,
  - (L) nuclear energy equipment,
  - (M) heavy water used for nuclear energy generation,
  - (N) nuclear fuels used for nuclear energy generation, and
  - (O) nuclear fuel rods, and
- (ii) not the manufacturing or processing of general purpose components or equipment which components or equipment are suitable for integration into property other than property described in subparagraph (i);
(c) the conversion of a vehicle, performed in Canada, into a property described in clause (a)(i)(J)

Qualifying mineral activity falls into 5 categories:

(a) the extraction of resources from a mineral deposit or from a tailing pond;
(b) a mineral processing activity, including crushing, grinding, milling, separation, sieving, screening, froth floatation, leaching, recrystallization, precipitation, drying, evaporation, heating, calcinating, roasting, smelting, casting of ingots, refining, purification, distillation, electrodeposition and surface roughening of electrodeposited foil, that
- (i) is performed at a mine site, well site, tailing pond, mill, smelter or refinery, and
- (ii) occurs prior to or as part of a process intended
  - (A) to increase the purity of at least one qualifying material, or
  - (B) to produce a material with non-trace amounts of a single qualifying material, and without non-trace amounts of any elements other than permitted elements;
(c) a recycling activity that is
- (i) sorting, disassembly or shredding of a recyclable material, or
- (ii) a material processing activity substantially similar to an activity described in paragraph (b) if that paragraph were read without reference to its subparagraph (i);
(d) a synthetic graphite activity that is
- (i) performed during or after the graphitization stage, and
- (ii) a material processing activity substantially similar to an activity described in paragraph (b) if that paragraph were read without reference to its subparagraph (i); or
(e) spherization of graphite or coating of spheronized graphite.

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Date modified:: 2024-08-27

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What property qualifies

CTM use

Determination of capital cost

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