Equipment Purchase and Investment Tax Credit Eligibility by Province

Buying new equipment helps your business grow, but it can get expensive fast. Across Canada, each province offers equipment purchase grants and investment tax credits to lower the cost. However, the rules are not the same everywhere. What counts as eligible equipment in one province may not work in another. If you know the rules, you could get 6% or more back on your purchase. If you don’t, you might miss out.

How Equipment Purchase and Investment Tax Credits Work in Canada

Most provinces support equipment purchases in two main ways:

Direct support for equipment purchases
These are grants or repayable contributions. They cover part of the cost when you buy new equipment.
Investment tax credits (ITCs)
These credits reduce the corporate income tax you owe after you buy eligible equipment.

Here are some important things to remember:

You must apply for grants and repayable contributions before you buy the equipment.
You claim investment tax credits after you buy, when you file your taxes.
Each province has its own rules for what counts as “eligible equipment.” Some allow used equipment. Others only allow new.

If you’re not sure which programs fit your business, GrantHub’s eligibility matcher can help you filter by province and industry.

Provincial Eligibility Rules You Should Know

Below are real examples of how equipment purchase and investment tax credit eligibility works in different provinces.

Prince Edward Island: Equipment Support and Investment Tax Credits

Capital Acquisition Support (PEI)

What it covers: Technology, equipment, and infrastructure that help your business grow or export
Funding: Up to $25,000 (covers 25% of eligible project costs)
Type: Repayable contribution
Who qualifies:
- Businesses registered and operating in PEI
- Export-focused businesses in sectors like advanced manufacturing, bioscience, ICT, clean tech, and aerospace
Key rule: The equipment must help your business grow or export. Routine replacements usually do not qualify.

You must get approval before buying the equipment. If you buy early, you could lose your chance at funding.

Enriched Investment Tax Credit (PEI)

Credit value: 25% of eligible equipment costs
Eligible equipment: Qualified manufacturing and processing equipment
Who qualifies: Corporations in PEI in approved strategic sectors
Important note: The credit reduces your corporate tax. If your business has no tax owing, you may not benefit right away.

Saskatchewan: Manufacturing and Processing Investment Tax Credit

Manufacturing & Processing Investment Tax Credit (SK)

Credit value: 6% of eligible equipment costs
Eligible purchases: New or used manufacturing and processing equipment
Who qualifies: Manufacturing and processing corporations in Saskatchewan
Key rule: You must pay provincial sales tax (PST) on used equipment to claim the credit.

Saskatchewan is one of the few provinces that clearly allows used equipment for this credit. This helps businesses lower costs when buying second-hand machinery.

Ontario: Equipment Use–Based Tax Refunds

Gasoline Used in Unlicensed Business Equipment (ON)

What it is: A refund of gasoline tax paid
Applies to: Fuel used in unlicensed business equipment (like construction or manufacturing machinery)
Eligibility rules:
- Equipment cannot be licensed under the Highway Traffic Act
- Fuel must be used only for business or industrial purposes
- You must keep detailed records

This is not a typical investment tax credit, but it helps reduce the cost of running certain equipment.

Nova Scotia: Energy-Efficient Equipment Rebates

Business Energy Rebates (NS)

What it covers: Energy-efficient business equipment
Benefit type: Rebates that lower the purchase cost
Eligibility focus: Equipment that saves energy and reduces your bills

You can often combine these rebates with other tax incentives, but you must stay within total funding limits.

Common Mistakes to Avoid

Buying equipment before approval
Programs like PEI’s Capital Acquisition Support require you to apply first. Buying before approval can make you ineligible.
Assuming used equipment is always eligible
Saskatchewan allows used equipment, but most other provinces do not.
Ignoring sector restrictions
Many tax credits are only for manufacturing, processing, or export-driven businesses.
Not keeping proper records
Missing invoices, proof of payment, or usage records can lead to your credit or refund being denied.

Frequently Asked Questions

Q: Are equipment purchase grants and investment tax credits the same thing?
No. Grants and repayable contributions give you support upfront. Investment tax credits reduce your taxes after you buy the equipment.

Q: Can I combine a grant with an investment tax credit?
Often yes, but there may be a cap on total government support. Each program has its own rules.

Q: Do sole proprietors qualify for investment tax credits?
Most investment tax credits are for corporations. Check the rules to see if your business structure qualifies.

Q: Is software considered equipment?
Sometimes. In PEI and Nova Scotia, software may count if it improves productivity or efficiency.

Q: What if my business operates in more than one province?
Eligibility is based on where the equipment is installed and used, not your head office location.

Next Steps

Rules for equipment purchase and investment tax credit eligibility change often. They also depend on your industry, business structure, and where the equipment will be used. Before you buy, check which programs match your business profile. GrantHub tracks hundreds of active Canadian grants and tax credits to help you find the right fit. Review your options, get approval where needed, and keep good records to increase your support.

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Equipment Purchase and Investment Tax Credit Eligibility by Province