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<h1 property="name" id="wb-cont" class="gc-thickline">Avoid the reduced tax credit rate for clean economy ITCs</h1>
<!--<div class="row">
<div class="col-md-8">--!>
<p><strong>If you are an employee, you may be looking for:</strong> <a href="https://cra-proto.github.io/clean-economy/clean-economy-itc/labour-requirements-employees-itc.html">What employees need to know about labour requirements</a></p>
<p>To avoid claiming a clean economy ITC at the reduced tax credit rate, you must elect into meeting the labour requirements.</p>
<p>The 2 main aspects of the labour requirements are the prevailing wage requirements and the apprenticeship requirements.</p>
<h2 class="h3">On this page</h2>
<ul>
<li><a href="#how">How the labour requirements affect the credit rate</a></li>
<li><a href="#apply">When the labour requirements apply</a></li>
<li><a href="#prewage">Prevailing wage requirements</a></li>
<li><a href="#apprentice">Apprenticeship requirements</a></li>
<li><a href="#compliance">Consequences for non-compliance</a></li>
<li><a href="#contact">Contact us</a></li>
</ul>
<h2 id="how">How the labour requirements affect the credit rate</h2>
<p>If you elect to meet the labour requirements, you can claim the ITC you have selected at the <strong>regular tax</strong> credit rate.</p>
<p>If you do <strong>not</strong> elect to meet the labour requirements, you will be eligible to claim the ITC you have selected at a <strong>reduced tax</strong> credit rate of <strong>10 percentage points less</strong> than the regular tax credit rate. For example, if the regular tax credit rate is 30%, the reduced tax credit rate is 20%.</p>
<p>The credit rates vary for each ITC that is subject to the labour requirements:</p>
<ul>
<li><a href="https://cra-proto.github.io/clean-economy/clean-economy-itc/carbon-capture-itc/claiming-credit-ccus-itc/calculate.html#rates">Carbon Capture, Utilization, and Storage (CCUS) ITC credit rates</a></li>
<li><a href="https://cra-proto.github.io/clean-economy/clean-economy-itc/clean-technology-itc/claiming-credit-ct-itc/avoid-reduced-credit-rate.html#rate">Clean Technology (CT) ITC credit rates</a></li>
</ul>
<h2 id="apply">When the labour requirements apply</h2>
<p>The labour requirements:</p>
<ul class="fa-ul">
<li><span class="fas fa-check text-success fa-li"></span>Apply in respect of specified property prepared or installed <strong>on or after</strong> November 28, 2023</li>
<li><span class="fas fa-times text-danger fa-li"></span>Do <strong>not</strong> apply to a clean economy ITC claimed for the acquisition of off-road zero emission vehicles, or the acquisition and installation of low carbon heat equipment</li>
</ul>
<p>To <strong>claim the regular tax credit rate</strong> for the ITC you have selected to apply for, you must do <strong>both</strong> of the following at the time of filing the ITC claim:</p>
<ul>
<li><strong>Elect</strong> to meet the labour requirements for each installation taxation year</li>
<li><strong>Attest</strong> that you have met the labour requirements for each installation taxation year and for each designated worksite</li>
</ul>
<h2 id="prewage">Prevailing wage requirements</h2>
<ol class="lst-stps ld-zr">
<li>
<h3 id="met-pre">Meeting the prevailing wage requirements</h3>
<p>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 <a href="#eligible">eligible collective agreement(s)</a> that applies to the workers.</p>
<h4>If covered workers are not subject to an eligible collective agreement</h4>
<p>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.</p>
<p>The amount must be calculated on a per hour or similar basis.</p>
<br>
<details>
<summary id="eligible">What is an eligible collective agreement for provinces and territories (other than Quebec)</summary>
<p>For provinces and territories (other than Quebec), an eligible collective agreement is defined as:</p>
<ul>
<li>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</li>
<li>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 wages and benefits for covered workers in a given trade that are at least equal to the regular wage (without taking into account overtime) and benefits provided for covered workers in the most recent multi-employer collective bargaining agreement</li>
</ul>
<br>
<p>The most recent collective agreements can be accessed through sources such as the CBTU or trade unions that are affiliates of the CBTU.</p>
<!--<h4 id="cbtu">CBTU and trade unions that are affiliates of CBTU</h4>
<p>The following are trade unions that are affiliates of the CBTU:</p>
<ul>
<li>International Association of Heat and Frost Insulators and Allied workers (IAHFIAW)</li>
<li>International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers</li>
<li>Operative Plasterer’s and Cement Masons’ International Association of the United States And Canada (OPCMIA)</li>
<li>International Brotherhood of Electrical Workers (IBEW)</li>
<li>International Brotherhood of Teamsters</li>
<li>International Union of Bricklayers and Allied Craftworkers (BAC)</li>
<li>International Union of Elevator Constructors (IUE)</li>
<li>International Union of Operating Engineers (IUOE)</li>
<li>International Union of Painters and Allied Trades (IUPAT)</li>
<li>Laborers’ International Union of North America (LIUNA)</li>
<li>Sheet Metal, Air, Rail and Transportation Workers (SMART)</li>
<li>United Association of Journeymen, Apprentices of the Plumbing and Pipefitting Industry of the united States and Canada (UA)</li>
</ul>
--!>
<p>Refer to: <a href="https://buildingtrades.ca/">Canada’s Building Trades Unions </a></p>
</details>
<details>
<summary>What is an eligible collective agreement for Quebec</summary>
<p>In Quebec, an eligible collective agreement is defined as a collective agreement negotiated in accordance with applicable provincial law.</p>
<p>Refer to: <a href="https://www.ccq.org/en/loi-r20/conventions-collectives">Collective agreements for Quebec</a></p>
</details>
</li>
<li>
<h3>Communicating the prevailing wage requirements</h3>
<p>You <strong>must</strong> communicate to employees:</p>
<ul>
<li>That a designated work site is subject to prevailing wage requirements in relation to covered workers</li>
<li>How they can report to the CRA any failures to pay prevailing wages</li>
</ul>
<br>
<p>This information <strong>must</strong> be communicated:</p>
<ul>
<li>By electronic means, or in a notice or poster</li>
<li>In a manner that is readily visible to and accessible by covered workers</li>
<li>In a plain language format explaining what it means for workers</li>
</ul>
<br>
<p>How to report non-compliance: <a href="https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/suspected-tax-cheating-in-canada-overview.html">Report suspected tax cheating in Canada</a></p>
<!--<p>Employees can report failures to meet prevailing wage requirements to the Minister of National Revenue (Minister).</p>
<p>Refer to: <a href="https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/suspected-tax-cheating-in-canada-overview.html">Report suspected tax cheating in Canada</a></p> --!>
</li>
<li>
<h3>Determining if the prevailing wage requirements were met</h3>
<p>There are various factors to consider when determining if labour requirements for prevailing wages have been met. </p>
<details>
<summary>Factors to consider for the prevailing wage requirements</summary>
<p>The following list is non-exhaustive and only meant to provide general guidance for potential ITC claimants.</p>
<p>Consider:</p>
<ul>
<li>How the wages were calculated for covered workers</li>
<li>How the value of the benefits paid to covered workers (vacation, pension, health and welfare) was determined</li>
<li>What <a href="#eligible">eligible collective agreement</a> was used and why</li>
<ul><li>The name(s) of the eligible collective agreement(s) that were obtained</li></ul>
<ul><li>List the eligible collective agreement(s) that were used to determine compensation, including regular wages and benefits </li></ul>
<ul><li>Provide reasoning as to why certain collective agreements and/or wage schedules within those agreements were or were not used</li></ul>
<li>The eligible collective agreement that was used was not expired</li>
<ul><li>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</li></ul>
<li>The efforts made to ensure sub contractors were aware of the labour requirements</li>
<li>The efforts made to ensure sub contractors conveyed the labour requirements to any sub-sub contractors</li>
<li>Whether a project labour agreement that covers the work associated with the ITC was signed</li>
<li>How the information was communicated to covered workers </li>
<li>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</li>
</ul>
</details>
</li>
<li>
<h3>Making elections and attestations for the prevailing wage requirements</h3>
<p>At the time of filing your claim, you <strong>must</strong>:</p>
<ul>
<li>Elect to meet the prevailing wage requirement for covered workers at a designated worksite for each installation taxation year</li>
<li>Attest that you have met the prevailing wage requirement for covered workers at a designated worksite for each installation taxation year</li>
</ul>
<br>
<p>There are consequences for not complying with the labour requirements.</p>
<p>Refer to: <a href="#compliance">Consequences for non-compliance</a></p>
<h4>Electing to meet the prevailing wage requirements</h4>
<p>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.</p>
<h4>Attesting to the prevailing wage requirements</h4>
<p>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.</p>
</li>
</ol>
<!-- <p>For more information, refer to: <a href="">Subsection 127.46 (3), Prevailing wage requirements</a></p> --!>
<h2 id="apprentice">Apprenticeship requirements</h2>
<ol class="lst-stps ld-zr">
<li>
<h3 id="met-app">Meeting the apprenticeship requirements</h3>
<p>Generally, the apprenticeship requirements are met by making <a href="#effort">reasonable efforts</a> to ensure that apprentices registered in a Red Seal trade work at least <strong>10%</strong> 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.</p>
<p>It is not necessary to demonstrate that you made reasonable efforts if:</p>
<ul>
<li>You meet or exceed the 10% threshold</li>
<li>You meet the lower percentage that may apply <a href="#law">if an applicable law or collective agreement restricts the percentage of apprentices below 10%</a></li>
</ul>
<br>
<details>
<summary id="effort">Make reasonable efforts to meet apprenticeship requirements</summary>
<p>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.</p>
<p>To rely on this “deeming rule”, at least every <strong>4 months</strong> you must do <strong>all</strong> of the following:</p>
<ol class="lst-stps ld-zr">
<li>
<h3>Advertise</h3>
<p>Post a bona fide job advertisement, seeking sufficient apprentices to perform those hours of labour at the designated work site.</p>
<ul>
<li>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</li>
<li>This job advertisement must be open and readily accessible on the <a href="https://www.jobbank.gc.ca/home">Job Bank</a> website of the Government of Canada <strong>and</strong> at least 2 other websites either on a continuous basis throughout the year or for at least 30 days from the time of posting</li>
</ul>
</li>
<li>
<h3>Communicate</h3>
<p>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.</p>
<ul>
<li>If the designated work site is outside of Quebec, the trade union must be an affiliate of Canada's Building Trades Unions (CBTU)</li>
<li>If the designated work site is in Quebec, the trade union must be recognized under applicable provincial law</li>
</ul>
</li>
<li>
<h3>Confirm</h3>
<p>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.</p>
</li>
<li>
<h3>Consider</h3>
<p>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.</p>
</li>
</ol>
<br>
<p>When you file your ITC claim, you <strong>must attest</strong> that you have done <strong>all of the above</strong>.<p>
<p>This attestation is separate from the attestation for apprenticeship requirements.</p>
<p>Refer to: <a href="#att">Attesting to the apprenticeship requirements</a></p>
<p>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.</p>
</details>
<details>
<summary id="law">If the applicable law or collective agreement restricts the percentage of apprentices below 10%</summary>
<p>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. </p>
<details>
<summary>Example: Restrictions on the percentage of apprentices</summary>
<p>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.</p>
<p>If they all work the same number of hours per day, then the highest possible percentage of hours performed by apprentices would be 9%.</p>
<p>The employer would still be compliant with the apprenticeship requirements because it is required by the collective agreement. </p>
</details>
</details>
</li>
<li>
<h3>Determining if the apprenticeship requirements were met</h3>
<p>There are various factors to consider when determining if labour requirements for apprenticeships have been met. </p>
<details>
<summary>Factors to consider for the apprenticeship requirements</summary>
<p>The following list is non-exhaustive and is only meant to provide general guidance for potential ITC claimants.</p>
<p>Consider:</p>
<ul>
<li>The calculation made to confirm that at least 10% of the total labour hours worked during the year by workers in the Red Seal trades have been performed by apprentices registered in a Red Seal trade (or equivalent) at a designated work site</li>
<li><a href="#law">If the applicable law or collective agreement restricts the percentage of apprentices below 10%</a></li>
<li>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 </li>
</ul>
</details>
</li>
<li>
<h3>Making elections and attestations for the apprenticeship requirements</h3>
<p>At the time of filing your claim, you <strong>must</strong>:</p>
<ul>
<li>Elect to meet the apprenticeship requirements for apprentices registered in a Red Seal Trade at a designated worksite for each installation taxation year</li>
<li>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</li>
</ul>
<br>
<p>There are consequences for not complying with the labour requirements.</p>
<p>Refer to: <a href="#compliance">Consequences for non-compliance</a></p>
<h4>Electing to meet the apprenticeship requirements</h4>
<p>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.</p>
<h4 id="att">Attesting to the apprenticeship requirements</h4>
<p>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.</p>
<h5>Attesting to reasonable efforts</h5>
<p>If you have to demonstrate that you made <a href="#effort">reasonable efforts</a> to meet apprenticeship requirements, 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.</p>
</li>
</ol>
<!-- <p>For more information, refer to:</p>
<ul>
<li><a href="">Subsection 127.46 (5), Apprenticeship requirements</a></li>
<li><a href="">Subsection 127.46 (16), Deemed reasonable efforts</a></li>
</ul>
--!>
<h2 id="compliance">Consequences for non-compliance</h2>
<p>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. </p>
<h3>Addition to tax for prevailing wages not compensated</h3>
<p>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 <a href="#gross">gross negligence</a> applies. The dollar amount will be $20 in 2023 and will be adjusted for inflation in each calendar year after 2023.</p>
<p>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.</p>
<ul>
<li>This amount is the difference between prevailing wages that were required to have been paid to the covered worker and the amount that the covered worker was actually paid for the year, <strong>plus interest</strong></li>
</ul>
<p>You have <strong>one year</strong> after receipt of the notification to pay the top-up amount.</p>
<ul>
<li>If you do not pay the top-up amount, you will be liable to pay a penalty of 120% of the top-up amount that was determined for each covered worker</li>
</ul>
<h3>Addition to tax for apprenticeship hours not met</h3>
<p>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 Red Seal trades, 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.</p>
<h3 id="gross">Gross negligence penalty</h3>
<p>Where failure to meet prevailing wage and apprenticeship requirements is intentional or in circumstances amounting to gross negligence, you will be:</p>
<ul>
<li>Disentitled to the regular tax credit rate and entitled only to the reduced tax credit rate </li>
<li>Liable to pay a penalty equal to 50% of the difference between the amount of the ITC claimed at the regular tax credit rate and the amount that you would have been entitled to under the reduced rate</li>
</ul>
<p>In circumstances amounting to gross negligence, the other penalties and corrective measures do not apply.</p>
<p>If you have <strong>not</strong> 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 and apprenticeship requirements apply.</p>
<details>
<summary>If you are a partnership</summary>
<p>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.</p>
<p>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.</p>
<p>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.</p>
</details>
<h2 id="contact">Contact us</h2>
<p>Call the CRA if you have questions about the labour requirements.</p>
<div id="ajax-fraser">
<h3>Fraser Valley and Interior Tax Services Office</h3>
<dl class="dl-horizontal brdr-0">
<dt>By phone:</dt> <dd><dl class="dl-horizontal mrgn-lft-0 brdr-0">
<dt style="clear: none; padding-top: 0px;"><strong>Telephone number:</strong></dt> <dd style="padding-top: 0px;"><p><a href="tel:18665784538" class="hidden-md hidden-lg nowrap"><span class="fas fa-phone fa-flip-horizontal"></span>1-866-578-4538<span class="wb-inv"> (opens up phone application)</span></a><strong class="hidden-xs hidden-sm nowrap"><span class="fas fa-phone fa-flip-horizontal"></span>1-866-578-4538</strong></p>
</dd> <dt>Hours:</dt> <dd><table class="table brdr-bttm">
<caption class="wb-inv">Dedicated TTY number hours</caption>
<thead><tr><th class="wb-inv" scope="col">Date</th>
<th class="wb-inv" scope="col">Hours</th>
</tr></thead><tbody><tr><td>Monday to Friday</td>
<td><strong>8 am to 4 pm</strong> (local time)</td>
</tr><tr><td>Saturday and Sunday</td>
<td>Closed</td>
</tr></tbody></table>
<p>Closed on <a href="https://www.canada.ca/en/revenue-agency/services/tax/public-holidays.html">public holidays</a></p>
</dd></dl>
</dd> <dt>By mail:</dt> <dd><p>Canada Revenue Agency<br>
Scientific Research and Experimental Development Division<br>
9755 King George Blvd<br>
Surrey BC V3T 5E1</p>
</dd>
</dl>
</div>
</section>
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<time property="dateModified">2024-05-04</time>
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