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Avoid the reduced tax credit rate for clean economy ITCs

If you are an employee, you may be looking for: What employees need to know about labour requirements

To avoid being restricted to a clean economy ITC at the reduced tax credit rate, you must elect to meet the labour requirements for those ITCs, where applicable.

The 2 main aspects of the labour requirements are the prevailing wage requirements and the apprenticeship requirements.

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How the labour requirements affect the credit rate

If you elect to meet the labour requirements, you can claim the ITC you have selected at the regular tax credit rate.

If you do not elect to meet the labour requirements, you will be eligible to claim the ITC you have selected at a reduced tax credit rate of 10 percentage points less than the regular tax credit rate. For example, if the regular tax credit rate is 30%, the reduced tax credit rate is 20%.

The credit rates vary for each ITC that is subject to the labour requirements:

When the labour requirements apply

The labour requirements:

To claim the regular tax credit rate for the ITC you have selected to apply for, you must do both of the following at the time of filing the ITC claim:

Prevailing wage requirements

  1. Meeting the prevailing wage requirements

    Prevailing wage requirements are met by compensating covered workers at a designated work site, in respect of their work on the preparation or installation of specified property, in accordance with an eligible collective agreement(s) that applies to the workers.

    If covered workers are not subject to an eligible collective agreement

    In this case, the prevailing wage requirements are generally met as long as the covered workers are compensated in an amount at least equal to the amount of wages (without taking into account overtime) and benefits (means vacation, pension, health and welfare benefits) required to be provided for employees under an eligible collective agreement that most closely aligns with the covered worker's experience level, tasks and location.

    The amount must be calculated on a per hour or similar basis.

    What is an eligible collective agreement for provinces and territories (other than Quebec)

    For provinces and territories (other than Quebec), an eligible collective agreement is defined as:

    • The most recent multi-employer collective bargaining agreement negotiated with a trade union that is an affiliate of Canada’s Building Trades Unions (CBTU) for a given trade in a region or province
    • A project labour agreement established with a trade union in accordance with applicable provincial law that covers the work associated with the investments eligible for specified tax credits, and that provides for wages and benefits for covered workers in a given trade that are at least equal to the regular wages (without taking into account overtime) and benefits provided for covered workers in the most recent multi-employer collective bargaining agreement negotiated with a trade union that is an affiliate of the CBTU that would have applied had the project labour agreement not been in place

    The most recent collective agreements can be accessed through sources such as the CBTU or trade unions that are affiliates of the CBTU.

    Refer to: Canada’s Building Trades Unions

    What is an eligible collective agreement for Quebec

    In Quebec, an eligible collective agreement is defined as a collective agreement negotiated in accordance with applicable provincial law.

    Refer to: Collective agreements for Quebec

  2. Communicating the prevailing wage requirements

    You must communicate to employees:

    • That a designated work site is subject to prevailing wage requirements in relation to covered workers
    • How they can report to the CRA any failures to pay prevailing wages

    This information must be communicated:

    • By electronic means, or in a notice or poster
    • In a manner that is readily visible to and accessible by covered workers
    • In a plain language format explaining what it means for workers

    How to report non-compliance: Report suspected tax cheating in Canada

  3. Determining if the prevailing wage requirements were met

    There are various factors to consider when determining if labour requirements for prevailing wages have been met.

    Factors to consider for the prevailing wage requirements

    The following list is non-exhaustive and only meant to provide general guidance for potential ITC claimants.

    Consider:

    • How the wages were calculated for covered workers
    • How the value of the benefits paid to covered workers (vacation, pension, health and welfare) was determined
    • What eligible collective agreement was used and why
      • The name(s) of the eligible collective agreement(s) that were obtained
      • List the eligible collective agreement(s) that were used to determine compensation, including regular wages and benefits
      • Provide reasoning as to why certain collective agreements and/or wage schedules within those agreements were or were not used
    • The eligible collective agreement that was used was not expired
      • If it was expired, and has not yet been replaced with an updated agreement (for example negotiations are ongoing), the amounts of wages and benefits stipulated in the agreement must be adjusted by the average Consumer Price Index for each calendar year that begins after the expiration
    • The efforts made to ensure sub contractors were aware of the labour requirements
    • The efforts made to ensure sub contractors conveyed the labour requirements to any sub-sub contractors
    • Whether a project labour agreement that covers the work associated with the ITC was signed
    • How the information was communicated to covered workers
    • If projects were under construction prior to November 28, 2023, that a review was made to verify that prevailing wage requirements were met starting from November 28, 2023

  4. Making elections and attestations for the prevailing wage requirements

    At the time of filing your claim, you must:

    • Elect to meet the prevailing wage requirements for covered workers at a designated worksite for each installation taxation year
    • Attest that you have met the prevailing wage requirements for covered workers at a designated worksite for each installation taxation year

    There are consequences for not complying with the labour requirements.

    Refer to: Consequences for non-compliance

    Electing to meet the prevailing wage requirements

    You must complete the election section on the prescribed form for the ITC you are claiming. Until the form becomes available, you must include a statement that you elect to meet the labour requirements as part of the information you include with your return when claiming the ITC.

    Attesting to the prevailing wage requirements

    You must complete the attestation section on the prescribed form for the ITC you are claiming. Until the form becomes available, you must include an attestation as part of the information you include with your return when claiming the ITC.

Apprenticeship requirements

  1. Meeting the apprenticeship requirements

    Generally, the apprenticeship requirements are met by making reasonable efforts to ensure that apprentices registered in a Red Seal trade work at least 10% of the total hours that are worked during the year by Red Seal workers at a designated work site of the incentive claimant on the preparation or installation of specified property.

    It is not necessary to demonstrate that you made reasonable efforts if either:

    Make reasonable efforts to meet apprenticeship requirements

    Where the apprenticeship requirements have not been met in respect of labour performed by apprentices registered in a Red Seal trade, you may be deemed to have made reasonable efforts in respect of hours of labour.

    To rely on this “deeming rule”, at least every 4 months you must do all of the following:

    1. Advertise

      Post a bona fide job advertisement, seeking sufficient apprentices to perform those hours of labour at the designated work site.

      • The advertisement must include a commitment to facilitate participation of apprentices in a Red Seal trade program, and statement that the job opportunity is open to both existing employees and new hires
      • This job advertisement must be open and readily accessible on the Job Bank website of the Government of Canada and at least 2 other websites either on a continuous basis throughout the year or for at least 30 days from the time of posting

    2. Communicate

      Communicate with a trade union and at least one secondary school or post-secondary educational institution for the purpose of facilitating the hiring of the apprentice positions described in the job advertisement.

      • If the designated work site is outside of Quebec, the trade union must be an affiliate of Canada's Building Trades Unions (CBTU)
      • If the designated work site is in Quebec, the trade union must be recognized under applicable provincial law

    3. Confirm

      Receive a confirmation in writing from the trade union that the trade union has provided as many apprentices as reasonably possible for work at the designated work site during the installation year, unless the trade union fails to respond within 5 business days of a request.

    4. Consider

      Review and duly consider all applicants received in response to the advertisement for apprenticeship opportunities that are offered directly by you, and take reasonable steps to ensure that other applicants are reviewed and duly considered.

    When you file your ITC claim, if you are relying on the deeming rule, you must attest that you have done all of the above.

    This attestation is separate from the attestation for apprenticeship requirements.

    Refer to: Attesting to the apprenticeship requirements

    It could be possible to demonstrate that you have met the reasonable efforts requirement in other ways, but if you choose to rely on this “deeming rule” then all of the above requirements apply.

    If the applicable law or collective agreement restricts the percentage of apprentices below 10%

    If the applicable law or collective agreement restricts the percentage of apprentices below 10%, you must make efforts to come as close as possible to meeting the 10%, without breaking the other applicable rules.

    Example: Restrictions on the percentage of apprentices

    An employer required 11 electricians to complete an installation. Under an applicable collective agreement, at the most, there can only be 1 apprentice for every 10 journeypersons on site.

    If they all work the same number of hours per day, then the highest possible percentage of hours performed by apprentices would be 9%.

    The employer would still be compliant with the apprenticeship requirements because it is required by the collective agreement.

  2. Determining if the apprenticeship requirements were met

    There are various factors to consider when determining if labour requirements for apprenticeships have been met.

    Factors to consider for the apprenticeship requirements

    The following list is non-exhaustive and is only meant to provide general guidance for potential ITC claimants.

    Consider:

    • The calculation made to confirm that at least 10% of the total labour hours worked during the year by Red Seal workers have been performed by apprentices registered in a Red Seal trade (or equivalent) at a designated work site
    • If the applicable law or collective agreement restricts the percentage of apprentices below 10%
    • If projects were under construction prior to November 28, 2023, that a review was made to verify that apprenticeship requirements were met starting from November 28, 2023

  3. Making elections and attestations for the apprenticeship requirements

    At the time of filing your claim, you must:

    • Elect to meet the apprenticeship requirements for apprentices registered in a Red Seal Trade at a designated worksite for each installation taxation year
    • Attest that you have met the apprenticeship requirements for apprentices registered in a Red Seal Trade at a designated worksite for each installation taxation year

    There are consequences for not complying with the labour requirements.

    Refer to: Consequences for non-compliance

    Electing to meet the apprenticeship requirements

    You must complete the election section on the prescribed form for the ITC you are claiming. Until the form becomes available, you must include a statement that you elect to meet the labour requirements as part of the information you include with your return when claiming the ITC.

    Attesting to the apprenticeship requirements

    You must complete the attestation section on the prescribed form for the ITC you are claiming. Until the form becomes available, you must include an attestation as part of the information you include with your return when claiming the ITC.

    Attesting to reasonable efforts according to the deeming rule

    If you relied on the deeming rule, you must complete a separate attestation section on the prescribed form for the ITC you are claiming. Until the form becomes available, you must include this attestation as part of the information you include with your return when claiming the ITC.

Consequences for non-compliance

There are consequences for not complying with the labour requirements if you have attested and elected to meet the labour requirements and claimed the credit at the regular rate.

Addition to tax for prevailing wages not paid

You will be liable to pay a dollar amount per day for each day in the installation taxation year, for each covered worker that was not paid the prevailing wage, except when gross negligence applies. The dollar amount will be $20 in 2023 and will be adjusted for inflation in each calendar year after 2023.

You may also be liable to pay a corrective measure in the form of a top-up amount to each covered worker as per notification from the Minister.

You have one year after receipt of the notification to pay the top-up amount.

If you have not been grossly negligent, you will still be able to claim the ITC at the regular credit rate, even if the above addition to tax provisions for prevailing wage apply.

Addition to tax for apprenticeship hours not met

You will be liable to pay a dollar amount multiplied by the difference between the total hours of labour that were required to be performed by apprentices registered in a Red Seal trade, and the total hours of labour that were actually performed by apprentices registered in Red Seal trades, plus any other hours of labour for which you met the apprenticeship requirements. The dollar amount is $50 in 2023 and will be adjusted for inflation in each calendar year after 2023.

If you have not been grossly negligent, you will still be able to claim the ITC at the regular credit rate, even if the above addition to tax provisions for apprenticeship requirements apply.

Gross negligence penalty

Where failure to meet prevailing wage and apprenticeship requirements is intentional or in circumstances amounting to gross negligence, you will be:

In circumstances amounting to gross negligence, the other penalties and corrective measures do not apply.

If you are a partnership

If you are a partnership that is subject to a tax or penalty, then any member of the partnership may elect to pay the amount of the relevant tax or penalty on behalf of the partnership.

Where no election has been made, the portion of the relevant tax or penalty that can reasonably be considered to be each member’s share is payable by each member.

Each member of the partnership is jointly and severally, or for civil law, solidarily, liable for any portion of the amount of the relevant penalty that is not paid as per the election or allocated according to each member’s share.

Contact us

Call the CRA if you have questions about the labour requirements.

Fraser Valley and Interior Tax Services Office

Telephone number
Hours
CRA’s Business Enquiries line hours
Day Hours
Monday to Friday 8 am to 4 pm (local time)
Saturday and Sunday Closed
Closed on public holidays
By mail
Canada Revenue Agency
Clean Economy Tax Incentives Division
9755 King George Blvd
Surrey BC V3T 5E1

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