Canada Introduces New Federal Tax Policy

• Canada has introduced a new federal tax policy through which it wants to enable renewable energy and energy conservation assets to be depreciated in full in the year they are commissioned
• It suggests businesses to immediately write off the full cost of specified clean energy equipment to spur new investments and adopt advanced clean technologies in the Canadian economy\
• According to CanSIA, solar energy, battery storage and electric vehicle charging infrastructure are included in the clean energy equipment definition
• The government says this step will encourage investments, create jobs for the middle class, help the country achieve its climate goals and position Canada to be globally competitive

The federal government of Canada has issued a new federal tax policy enabling renewable energy and energy conservation assets to be fully depreciated  in the year they are commissioned. The Canadian Solar Industries Association (CanSIA) says this accelerated depreciation defers taxable income to later years, leading to strengthening of their business case and improving access to finance for clean energy technologies.

The Fall Economic Statement 2018, issued by the country's Department of Finance, lists things that the government will invest in 'that matter most' to Canadians. It includes proposals that among other measures will accelerate Canada's business investment, and introduce regulatory changes to make it easier for businesses to grow and create jobs.

Among three important immediate changes proposed by the government for Canada's tax system, one reads, "Allowing businesses to immediately write off the full cost of specified clean energy equipment to spur new investments and the adoption of advanced clean technologies in the Canadian economy."

Under the head Full Expensing for Clean Energy Equipment, the policy proposes to offer immediate expensing for qualifying assets acquired after November 20, 2018, to be gradually phased out starting in 2024, and will no longer be in effect for investments put in use after 2027.

"The enhanced allowance will initially provide a 100% deduction, with a phase-out for property that becomes available for use after 2023. The half-year rule will effectively be suspended for property eligible for this measure," reads the policy document.

Currently, the government provides an accelerated capital cost allowance for clean energy equipment. Through the policy, it suggests specified clean energy equipment to be eligible for immediate expensing leading to full tax write-off the year it is put into service.

The government believes this will spur investments, create jobs for the middle class, help the country achieve its climate goals and position Canada to be globally competitive.

CanSIA said solar energy, battery storage and electric vehicle charging infrastructure is included in the clean energy equipment definition. It applauded the step.

"This new change to federal tax policy will support businesses to invest in technologies such as solar energy and energy storage. The benefits of this measure will span far beyond those individual businesses and throughout our entire economy especially due to the new demand created for important engineering, construction and trades jobs," said CanSIA President & CEO, John Gorman.

The entire Fall Economic Statement 2018 is available on the website of the Government of Canada.