What the Ontario Innovation Tax Credit Covers: Eligible Expenses and More
The Ontario Innovation Tax Credit (OITC) is a valuable tool for corporations conducting scientific research and experimental development (SR&ED) in Ontario. This refundable tax credit incentivizes businesses to invest in innovation by offsetting costs associated with eligible R&D activities.
Overview of the Ontario Innovation Tax Credit
The OITC allows qualifying corporations to claim a refundable tax credit for eligible expenditures on SR&ED performed in Ontario. With a tax credit rate of 8% for taxation years commencing after May 31, 2016, this program is designed to encourage innovation and competitiveness within the province.
For complete eligibility requirements, see the complete program guide.
Funding Amounts & Rates
Corporations can claim up to $240,000 in tax credits based on an expenditure limit of $3 million for taxation years starting after May 31, 2016. The program provides a prorated credit for years straddling June 1, 2016. Visit the complete program guide for current funding rates.
Eligible Expenses
Eligible expenses under the OITC include a broad range of R&D-related costs. Corporations can claim expenditures such as:
Salaries and Wages: Payments to employees directly involved in R&D activities.
Materials and Supplies: Costs of materials consumed or transformed in the R&D process.
Contractor Fees: Payments to third-party contractors conducting R&D on behalf of the corporation.
Overhead Costs: Indirect costs directly attributable to R&D activities.
For more detailed information on eligible expenses, please refer to the complete program guide.
Ineligible Expenses
Certain costs do not qualify for the OITC, such as:
Marketing and Sales Expenses: Costs not directly related to R&D.
Administrative Overhead: General business overhead unrelated to R&D.
Land and Building Costs: Expenses related to acquiring or improving property.
Expense Documentation Requirements
Corporations must maintain thorough documentation to support their claims, including:
Detailed expenditure records
SR&ED project descriptions
Justification of how expenses relate to R&D activities
Examples of Funded Projects
Projects funded through the OITC typically involve innovative activities such as:
Developing new manufacturing processes
Creating proprietary software systems
Improving agricultural technologies
Conclusion
The Ontario Innovation Tax Credit provides a significant opportunity for corporations to reduce the costs associated with R&D projects, ultimately fostering innovation within the province. For detailed guidance on how to maximize your claim, consult the complete program guide.
