Ontario Research and Development Tax Credit
At a glance
- No Condition
- Open Date : November 14, 2019
- All industries
- Government of Ontario
- Ontario Ministry of Finance
Overview
Eligibility criteria
Qualifying corporations can claim a non-refundable tax credit on eligible scientific research and experimental development expenditures performed in Ontario to reduce their Ontario corporate income tax payable. To qualify for the Ontario Research and Development Tax Credit, a corporation must:
- Have a permanent establishment in Ontario
- Carry on scientific research and experimental development in Ontario during the year
- Be eligible to claim the federal investment tax credit under section 127 of the federal Income Tax Act (Canada)
- Not be exempt from corporation income tax
- Have filed a scientific research and experimental development expenditures claim on federal form T661 for the tax year
Who is eligible
Eligible corporations for the Ontario Research and Development Tax Credit must have a permanent establishment in Ontario, conduct scientific research and experimental development in Ontario, be eligible for the federal investment tax credit, and have filed a claim for SR&ED expenditures on federal form T661.
- Corporations with a permanent establishment in Ontario
- Corporations engaged in scientific research and experimental development in Ontario
- Corporations eligible for the federal investment tax credit under section 127 of the federal Income Tax Act (Canada)
- Corporations that have filed a scientific research and experimental development expenditures claim on federal form T661 for the tax year
Eligible expenses
Eligible expenditures for the Ontario Research and Development Tax Credit include costs for scientific research and experimental development carried out in Ontario, qualifying under section 127 of the federal Income Tax Act (Canada), and attributable to a permanent establishment in Ontario.
- Costs incurred for scientific research and experimental development in Ontario
- Expenditures that meet the requirements of section 127 of the federal Income Tax Act (Canada)
- Expenditures directly related to a permanent establishment in Ontario
Eligible projects & activities
Here is a summary of the projects or activities eligible for the Ontario research and development tax credit:
- Scientific research and experimental development carried out in Ontario
- Expenditures that qualify under section 127 of the federal Income Tax Act (Canada)
- Activities attributable to a permanent establishment in Ontario
Evaluation & selection criteria
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
How to apply
- Step 1: Ensure your corporation has a permanent establishment in Ontario
- Step 2: Carry on scientific research and experimental development in Ontario during the year
- Step 3: Confirm eligibility to claim the federal investment tax credit under section 127 of the federal Income Tax Act (Canada)
- Step 4: Ensure the 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: Incur eligible expenditures for scientific research and experimental development carried on in Ontario
- Step 7: Ensure eligible expenditures qualify under section 127 of the federal Income Tax Act (Canada)
- Step 8: Confirm all eligible expenditures are attributable to a permanent establishment in Ontario
- Step 9: File the tax credit claim on Schedule 508 and include it with the T2 corporation income tax return
- Step 10: Use the tax credit to reduce the Ontario corporate income tax payable
Ontario Research and Development Tax Credit
Corporations in Ontario can claim a non-refundable tax credit for eligible scientific research and experimental development expenditures to reduce their Ontario corporate income tax payable.
Ontario Research and Development Tax Credit Overview
Qualifying corporations in Ontario can claim a non-refundable tax credit on eligible scientific research and experimental development (SR&ED) expenditures to reduce their Ontario corporate income tax payable. The tax credit rate is 3.5% for taxation years that commence after May 31, 2016. Qualifying criteria include having a permanent establishment in Ontario, conducting SR&ED in Ontario, being eligible for the federal investment tax credit, and filing the necessary documentation. Eligible expenditures must be for SR&ED carried out in Ontario, are reduced by certain types of assistance, and must be claimed on Schedule 508 with the T2 corporation income tax return. Unused tax credits can be carried back or forward, and recapture rules apply in specific scenarios.
Corporations dealing at non-arm's length may also transfer eligible expenditures in certain circumstances. The tax credit can only be used to reduce Ontario corporate income tax payable, and the administration is handled by the Canada Revenue Agency on behalf of Ontario through the federal income tax system. For further information and questions, corporations can contact the Canada Revenue Agency. Understanding the Ontario Research and Development Tax Credit can help corporations invest in innovation and benefit from tax incentives for their research and development activities in Ontario.
