November 27, 2015
Green Energy Investment in Canada – Tax Matters
Are you a business or investor considering investing in a green energy company or project? If so, there are tax issues to consider and tax incentives you should be aware of.
Often these green energy investments require significant capital costs to determine if the projects can be developed. The federal government has provided a number of green energy incentives in Canada for taxpayers to undertake these pursuits.
The federal government of Canada has provided green energy tax incentives to allow for the accelerated deduction of the initial development costs needed to kick-start these green energy projects such as:
Wind energy production
Run of river hydro projects
Hydro dam construction
Biofuel energy production
Solar energy production
Or other renewable “green” energy investment platforms
These expenses are now considered fully deductible and can be even passed on to investors.
Using a vehicle known as a flow-through share, investors who purchase shares in a green energy company can also access the income tax deductions for the development costs that the company incurs. This can be an effective way to raise funds to finance these capital-intensive projects in a tax-efficient manner.
Additionally, capital costs of green energy projects can be deducted for income tax purposes at an accelerated rate – up to 50 percent of the project cost per year. If structured properly, this can have the effect of reducing or even eliminating the annual income tax costs in the initial years.
The above content is believed to be accurate as of the date of posting. Canadian tax laws are complex and are subject to frequent changes. Professional advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.