Ontario Research and Development Tax Credit (ORDTC)

Who is eligible?

• Corporations with a permanent establishment in Ontario
• Corporations conducting scientific research and experimental development in Ontario

Who is not eligible

• Corporations that are exempt from corporation income tax.

Eligible expenses

• Expenditures incurred for scientific research and experimental development activities carried out in Ontario.

Eligible geographic areas

This tax credit is exclusively available to corporations with a permanent establishment in a specific region of Canada. The focus is on businesses conducting qualifying research and development within these geographical boundaries.

• Corporations with a permanent establishment in Ontario, Canada.

There are evaluation and selection criteria for this grant. The evaluation and selection criteria include:

• Having a permanent establishment in Ontario
• Carrying out scientific research and experimental development in Ontario
• Being eligible to claim the federal investment tax credit under section 127 of the federal Income Tax Act
• Not being exempt from corporation income tax
• Filing a scientific research and experimental development expenditures claim on federal form T661 for the tax year

• Step 1: Determine Eligibility Verify that your corporation has a permanent establishment in Ontario and is engaged in scientific research and experimental development in Ontario.
• Ensure the corporation is eligible to claim the federal investment tax credit and is not exempt from corporation income tax.
• Confirm that a federal form T661 scientific research and experimental development expenditures claim has been filed for the tax year.
• Step 2: Identify Eligible Expenditures Determine expenditures incurred for scientific research and experimental development carried out in Ontario.
• Ensure expenditures meet criteria outlined in section 127 of the federal Income Tax Act (Canada) and are attributable to a permanent establishment in Ontario.
• Reduce eligible expenditures by government assistance, non-government assistance, and contract payments (excluding the Ontario Research and Development Tax Credit or federal Scientific Research and Development Investment Tax Credit).
• Step 3: Complete the T2 Corporation Income Tax Return Download and complete the Schedule 508, Ontario Research and Development Tax Credit form.
• Prepare the T2 Corporation Income Tax return with all applicable financial data.
• Step 4: Submit the Tax Credit Application File the completed Schedule 508 along with the T2 Corporation Income Tax return to the Canada Revenue Agency.
• Ensure all documentation is accurate and submitted before the deadline.
• Step 5: Manage Unused Tax Credits If there is an unused portion, determine if it can be carried back three years or carried forward up to 20 years.
• Step 6: Address Recapture Rules Utilize the 23.56% rate for calculating recapture if applicable, in cases where property previously claimed is disposed of or converted to commercial use.

• Any unused portion of the tax credit may be carried back three years or carried forward twenty years.
• Recapture rules apply if property previously claimed is later disposed of or converted to commercial use.
• The Canada Revenue Agency administers this credit on behalf of Ontario through the federal tax system.
• The tax credit rate is prorated for taxation years that straddle key rate change dates.