Get a refundable tax credit of 8% for innovative scientific research and experimental development expenditures.
Qualifying corporations can claim a refundable tax credit for qualified expenditures on scientific research and experimental development performed in Ontario.
- For taxation years that commence after May 31, 2016, the tax credit rate is 8 per cent.
- The tax credit rate is prorated for taxation years straddling June 1, 2016.
- For taxation years that end before June 1, 2016, the tax credit rate is 10 per cent.
Example 1
If a corporation’s taxation year is from January 1, 2017 to December 31, 2017, the tax credit rate is 8 per cent.
Example 2
If a corporation’s taxation year is from January 1, 2016 to December 31, 2016, the tax credit rate is calculated as follows:
The sum of:
= (10% × 152 / 366) + (8% × 214 / 366)
= 8.8306%
- 10 per cent multiplied by the ratio of the number of days in the year that are before June 1, 2016 to the total number of days in the year, and
- 8 per cent multiplied by the ratio of the number of days in the year that are after May 31, 2016 to the total number of days in the year.
Example 3
If a corporation’s taxation year is from January 1, 2015 to December 31, 2015, the tax credit rate is 10 per cent.
How much money could I receive?
Based on an expenditure limit of $3 million:
- for taxation years that commence after May 31, 2016, the maximum tax credit amount is $240,000
- the maximum tax credit amount is prorated for taxation years straddling June 1, 2016, and
- for taxation years that end before June 1, 2016, the maximum tax credit amount is $300,000.
The expenditure limit is gradually reduced if:
- federal taxable income of the prior tax year exceeds $500,000 and is totally eliminated at $800,000, or
- the prior year’s taxable capital exceeds $25 million and is totally eliminated at $50 million.
Associated corporations must share the expenditure limit. The limit is also reduced for a short tax year based on the number of days in the tax year, in proportion to 365.
Do I qualify?
A corporation can claim the tax credit, if the corporation:
- has a permanent establishment in Ontario
- carries out scientific research and experimental development in Ontario during the year
- is eligible to claim the federal investment tax credit under section 127 of the federal Income Tax Act (Canada)
- is not exempt from corporation income tax, and
- has filed a scientific research and experimental development expenditures claim on federal form T661 for the tax year.
Qualified expenditure
A qualified expenditure:
- is incurred for scientific research and experimental development carried on in Ontario
- qualifies under section 127 of the federal Income Tax Act (Canada)
- is incurred when the corporation has a permanent establishment in Ontario and the expenditure is attributable to that permanent establishment
- includes 40 per cent of capital expenditures made prior to 2014 and 100 per cent of current expenditures, and
- capital expenditures made after December 31, 2013 are no longer qualified expenditures.
Qualified expenditures are reduced by government assistance, non-government assistance and contract payments. The Ontario Research and Development Tax Credit, Ontario Business Research Institute Tax Credit, Ontario Innovation Tax Credit and federal Scientific Research and Experimental Development investment tax credit are not government assistance for purposes of determining the Ontario Innovation Tax Credit qualified expenditures. Under certain conditions, the receipt of a contract payment will not reduce qualified expenditures.