Ontario Innovation Tax Credit
At a glance
- No Condition
- Open Date : November 14, 2019
- All industries
- Government of Ontario
- Ontario Ministry of Finance
Overview
Eligibility criteria
The eligibility criteria for the Ontario Innovation Tax Credit grant are as follows:
- Must have a permanent establishment in Ontario
- Carries out scientific research and experimental development in Ontario during the year
- Eligible to claim the federal investment tax credit under section 127 of the federal Income Tax Act (Canada)
- Not exempt from corporation income tax
- Has filed a scientific research and experimental development expenditures claim on federal form T661 for the tax year
Who is eligible
Eligible types of companies for the Ontario Innovation Tax Credit grant include corporations that have a permanent establishment in Ontario, carry out scientific research and experimental development in Ontario, are eligible to claim the federal investment tax credit under section 127 of the federal Income Tax Act (Canada), and are not exempt from corporation income tax.
- Corporations with a permanent establishment in Ontario
- Corporations carrying out scientific research and experimental development in Ontario
- Corporations eligible to claim the federal investment tax credit under section 127 of the federal Income Tax Act (Canada)
- Corporations not exempt from corporation income tax
Eligible expenses
There are eligible expenses for this grant. Eligible expenses include:
- Scientific research and experimental development carried out in Ontario
- Expenditures that qualify under section 127 of the federal Income Tax Act (Canada)
- Capital expenditures made prior to 2014 and current expenditures
Eligible projects & activities
Projects or activities eligible for the Ontario Innovation Tax Credit grant must involve scientific research and experimental development carried out in Ontario. Qualified expenditures include capital expenditures made before 2014 and current expenditures that meet the criteria.
- Scientific research and experimental development in Ontario
- Capital expenditures prior to 2014
- Current expenditures meeting the qualification criteria
Evaluation & selection criteria
There are evaluation and selection criteria for this grant. The criteria include:
- Corporation must have a permanent establishment in Ontario
- Carries out scientific research and experimental development in Ontario during the year
- Eligible to claim the federal investment tax credit under section 127 of the federal Income Tax Act (Canada)
- Has filed a scientific research and experimental development expenditures claim on federal form T661 for the tax year
How to apply
- Step 1: Ensure your corporation has a permanent establishment in Ontario
- Step 2: Conduct scientific research and experimental development in Ontario during the tax year
- Step 3: Make sure your corporation is eligible to claim the federal investment tax credit under section 127 of the federal Income Tax Act (Canada)
- Step 4: Verify that your corporation is not exempt from corporation income tax
- Step 5: File a scientific research and experimental development expenditures claim on federal form T661 for the tax year
- Step 6: Calculate and document qualified expenditures incurred for research and development in Ontario
- Step 7: Reduce qualified expenditures by applicable government assistance, non-government assistance, and contract payments
- Step 8: Complete and submit Schedule 566 along with the T2 corporation income tax return to claim the Ontario Innovation Tax Credit
Ontario Innovation Tax Credit
Qualifying corporations can claim a refundable tax credit for qualified expenditures on scientific research and experimental development performed in Ontario. The tax credit rate is either 8% or 10%, depending on the taxation year, with maximum amounts varying based on expenditure limits.
Ontario Innovation Tax Credit Overview
The Ontario Innovation Tax Credit is designed to incentivize corporations conducting scientific research and experimental development in Ontario. Qualifying corporations with a permanent establishment in Ontario can claim a refundable tax credit for eligible expenditures incurred during the tax year. The credit rate is 8% for years starting after May 31, 2016, with a prorated rate for years spanning that date, while it is 10% for years ending before June 1, 2016.
To be eligible, corporations must carry out qualified research activities in Ontario, be eligible for the federal investment tax credit, not be exempt from corporate income tax, and have filed a scientific research and experimental development expenditures claim on federal form T661 for the tax year. Qualified expenditures include those incurred for scientific research and experimental development in Ontario that meet the federal criteria and are attributable to the corporation's permanent establishment in Ontario.
The maximum tax credit amount is based on an expenditure limit of $3 million, with reductions if certain income and capital thresholds are exceeded. Associated corporations share the expenditure limit, and it is adjusted for short tax years based on the number of days. Corporations can claim the tax credit on Schedule 566 filed with their T2 corporation income tax return.
The administration of the Ontario Innovation Tax Credit is overseen by the Canada Revenue Agency through the federal income tax system. For more information or questions about the program, corporations can contact the Canada Revenue Agency directly. The credit aims to promote innovation and research in Ontario by supporting eligible corporations in their scientific endeavors.
