At a glance
- Manufacturers may be eligible for provincial and regional investment tax credits on qualifying capital investments.
- Federal incentives may provide additional tax relief for qualifying M&P buildings and zero-emission technology manufacturing.
- Eligibility and interactions vary by program, making it important to assess potential incentives before assets are acquired, leased, or commissioned.
In recent years, the federal and some provincial governments have greatly increased tax incentives available to businesses carrying out manufacturing and processing (M&P) in Canada. This article summarizes the provincial incentives currently available, as well as selected federal income tax incentives.
What provincial M&P investment tax credits are available?
Provincial M&P credits generally reward investments in productive commercial assets rather than technological advancement through assets dedicated to SR&ED (scientific research and experimental development) projects. In any given year, a manufacturer may also make investments to enhance its manufacturing and processing capabilities that are eligible for specific provincial investment tax credits.
In addition to the potential applicability of the federal immediate expensing of capital cost allowance (CCA) tax deductions, the following must also be tested to determine whether additional ITCs can be earned on various asset purchases such as the:
- claimant status (as Canadian-controlled private corporation or other);
- prescribed property classes;
- location;
- acquisition timing;
- available-for-use timing;
- and the nature of the manufacturing activity.
Note that applicable acquisition dates including range of time frames vary by program.
What provincial and regional capital credits are available?
Several provincial and federal investment tax credits are available for qualifying capital investments, with eligibility requirements and rates varying by program, as outlined below.
| Jurisdiction | Program / rate | Typical eligible property | SR&ED interaction point |
|---|---|---|---|
| Ontario | OMMITC: 15% | Qualifying M&P buildings, machinery and equipment. | Can stand alone. Dual eligibility for other programs must be tested separately, including assistance and cost-base effects. |
| British Columbia | B.C. M&P ITC: 15% | New qualifying buildings and specified machinery or equipment. | The same expenditure cannot be claimed under both the B.C. M&P credit and B.C. SR&ED credit. |
| Saskatchewan | M&P ITC: 6% | Qualifying buildings, machinery and equipment. | May stand alone; review assistance and the eligible expenditure base. |
| Manitoba | MITC: 8% | Qualifying M&P buildings, machinery and equipment. | May stand alone; evaluate overlap and adjustments asset by asset. |
| Quebec | C3i: rate varies | Specified equipment, technology assets and software. | Separate Quebec eligibility and interaction analysis is required. |
| Atlantic region | Federal AITC: 10% | New qualified buildings, machinery, equipment and prescribed energy property. | Separate federal regional credit; may stand alone or coexist with SR&ED subject to interaction rules. |
When to assess incentives for capital initiatives
The best time to evaluate these incentives is before an asset is acquired, leased or commissioned.
Finance, tax, engineering and operations teams should work from a common register that records:
- expected function;
- location;
- ownership or lease terms;
- CCA class;
- project linkage;
- SR&ED use;
- M&P use;
- commissioning date;
- grant or loan assistance received;
- and supporting documents.
A strategic approach to asset purchases can improve the corporation’s cash flow and help reduce tax authorities’ assessment times and costly audits. When undertaking this planning, it is important to apply each program’s rules separately and model their interactions. To help support the financial impact of these incentives, documentation procedures should also be built into the capital or leasing process from the outset.
Federal income tax write-off for M&P buildings
When the federal government introduced the Productivity Mega Deduction on Sept. 15, 2026, the main capital asset that was not allowed immediate expensing was buildings. However, the 2025 budget proposed a 100% write-off of the cost of a building acquired on or after Nov. 4, 2025, provided the building is used for M&P activities before 2030. This write-off is also allowed for significant additions or renovations to existing buildings used in M&P. An important element of this incentive is that at least 90% of the building’s square footage must be used for M&P activities.
What incentive applies to zero-emission technology manufacturing
Businesses that manufacture equipment for use in clean energy equipment, including component parts that can only be used in such clean energy equipment, are also able to access a lower federal corporate tax rate on their corporate profits derived from such manufacturing. The lower rate is half of the regular federal corporate tax rate that would otherwise apply, or a reduction of 4.5% for taxable income that would otherwise be allowed the small business deduction, or a reduction of 7.5% for taxable income that would not qualify for the small business deduction. These reductions apply for taxation years that begin before 2032. Such reductions are gradually reduced to nil by 2035.
Federal Clean Economy Investment Tax Credits, including the Clean Technology Manufacturing investment tax credit, are also available.
How BDO can help
To ensure you benefit fully from these M&P incentives programs and to help you assess other available incentives and how they may interact together, contact a BDO advisor for personalized guidance and support.
The information in this publication is current as of Oct. 8, 2026
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.