Ontario

Companies based in Ontario can take advantage of several different tax credits:

• Ontario Innovation Tax Credit (OITC)
• Ontario business-research institute tax credit (OBRITC)
• Ontario research and development tax credit (ORDTC)
• Ontario Transitional Tax Debits and Credits

Ontario Innovation Tax Credit (OITC)

OITC has been administered by CRA since December 31, 2008.

Available to: All corporations based in, and carrying out SR&ED in Ontario, and are eligible for the OITC.

This credit is refundable at the rate of 10% for tax years ending before June 1, 2016, 8% for tax years starting after May 31, 2016 and prorated for a year that includes May 31, 2016.

The refundable tax credit rate refers to the smaller amount of eligible expenditure incurred by the company in Ontario and its total expenditure limit. The annual spending limit of $3 million of eligible spending is phased out when the taxable paid-up equity of the company passes $25 million for its preceding tax year.

The deadline to claim the credit: Not applicable

Carryback and carryforward: Credits cannot be carried back or forward. Any OITC in excess of tax otherwise payable will be refunded.

Assistance: The federal pool of deductible and eligible SR&ED credit will be cut down by the OITC.

Recapture: Not required.

Waiver of tax credit: Tax credit or a part of it may be waived off by the company. To do this, provide a written waiver with the return, which is expected to be filed on or before 6 months after the tax year, or on an amended return for that year.

Ontario Business-Research Institute Tax Credit (OBRITC)

OBRITC has been run by the CRA since December 31, 2008. It is icompletely refundable at 20% of eligible expenses.

Available to: Corporations which may or may not be part members of partnerships (except particular members) residing in Ontario performing SR&ED under eligible contracts with eligible research institutes (ERIs) qualify for the OBRITC. The $20 million cap is to be assigned amongst an associated group of corporations.

The deadline to claim the credit: Not applicable.

Carryback and carryforward: Credits cannot be carried back or forward. Any OBRITC in excess of tax otherwise payable will be refunded.

Assistance: The federal pool of deductible and eligible SR&ED credit will be cut down by the OBRITC.

Recapture: Not required.

Potential to renounce: Not required.

Ontario Research and Development Tax Credit (ORDTC)

The ORDTC has been run by the CRA since December 31, 2008. It is a non refundable tax credit based on eligible expenditures.

Available to: Corporations permanently based in Ontario, taking part in SR&ED and eligible for SR&ED ITCs. The rate is 4.5% for tax years ending before June 1, 2016; 3.5% for tax years starting after May 31, 2016; and prorated for tax years ending on or after June 1, 2016 and including May 31, 2016.

The deadline to claim the credit: Not applicable.

Carryback and carryforward: Credits can be carried back 3 years to minimize corporate income tax payable, and can be carried forward 20 years.

Assistance: The federal pool of deductible and eligible SR&ED credit will be cut down by the ORDTC.

Recapture: Will give rise to Ontario Tax, payable otherwise.

Wavier of tax credit: Tax credit or a part of it may be waived off by the company if it offers a written waiver with its return, which is expected to be filed on or before 6 months after the tax year, or on an amended return for that year.

Ontario Transitional Tax Debits and Credits

These debits and credits have been administered by the CRA since December 31, 2008.

Available to: Particular corporations that may be subject to transitional tax debits or that seek to claim transitional tax credits. In Ontario and federal corporate income tax purposes, taxpayers usually have tax reserves in sums that can be moved to another tax year.

However, in compliance with the federal definition of taxable income, the Ontario tax pool balance must assume its federal value (the amount in the federal pool) which may necessitate upward or downward adjustments in the pools. As a consequence, corporations may gain or lose in the future. This allows SR&ED participants to postpone the effects of the transitional debit concerning unclaimed SR&ED expenditures.

(Research and development (R&D) tax credit and the funding is in addition to the federal SR&ED program)
(This information is correct as at 31 August 2024)