- Qualifying Corporation
Corporation Connected to an ERI
- Eligible Research Institute
Funding of Organization
- Eligible Contract
Definition of Eligible Contract
- Qualified Expenditure Limit
- Qualified Expenditures
Contributions Received from an ERI
Transactions in the Ordinary Course of Business
- Advance Rulings
For Further Information
To foster world-class research institutions in Ontario and to promote partnerships between
business and Ontario post-secondary educational institutions, the 1997 Ontario Budget
introduced the Ontario Business-Research Institute
(OBRI) Tax Credit.
This Bulletin describes the OBRI tax credit based on the rules contained in section 43.9 of
the Corporations Tax Act (CTA)
and Regulations 76/99 and 335/99 filed on February 25 and
December 3, 1999 respectively, amending regulation 183 RRO 1990. The bulletin provides
general guidelines on the OBRI tax credit. It is not a substitute for the legislation contained
in section 43.9 of the CTA and Part XI of the regulations made under that Act.
The OBRI tax credit provides a qualifying corporation with a 20 per cent refundable tax
credit for scientific research and experimental development expenditures
in Ontario under an eligible contract with an eligible research institute
(ERI). With an annual
$20 million cap on qualifying expenditures, the maximum tax credit a corporation or an
associated group of corporations can claim is $4 million. Small businesses may claim the 20
per cent OBRI tax credit in addition to the 10 per cent Ontario Innovation Tax Credit for a
combined tax credit of 30 per cent of qualifying expenditures.
2 QUALIFYING CORPORATION
A corporation will be a qualifying corporation in a taxation year if it:
- carries on business in the taxation year through a permanent establishment in
Ontario and is not exempt from tax under the CTA,
- enters into, or is a member (other than a specified member) of a partnership that
enters into an eligible contract with an ERI (see section 3 below),
- is not connected (see below) to the ERI which carries out any part of the OBRI qualifying research,
- is not controlled directly or indirectly at any time during the 24-month period before
the eligible contract was entered into by:
- a trust, a beneficiary of which was an ERI that is a party to the eligible contract
or which performed SR&ED under the eligible contract, or
- a corporation carrying on a personal services business.
(See CTA subsection 43.9(4)).
Corporation Connected to an ERI
A corporation is generally considered to be connected to an ERI if, at any time during the
term of the contract or the 24-month period before the contract was entered into:
- the ERI owns directly or indirectly shares of the corporation that carry more than 10
per cent of the voting rights of shares of the corporation or have a fair market value of
more than 10 per cent of the fair market value of all the issued shares of the
- the ERI and the corporation are members of the same partnership;
- the ERI and the corporation do not deal at arm's length;
- the ERI, alone or acting in concert with one or more other ERIs, controls the
corporation directly or indirectly; or
- a partnership in which the ERI is a member owns shares directly or indirectly in the
(See CTA subsection 43.9(5) and regulation subsection 1101(1)).
A specified member of a partnership is defined in subsection 248(1) of the Income Tax Act
(Canada) (ITA). Generally speaking, a specified member is a partner who is not actively
engaged in the partnership's business.
3 Eligible Research Institute
To obtain the OBRI tax credit, a qualifying corporation must enter into an eligible contract
(see section 4) with an ERI.
Appendix 1 to this bulletin contains a list of organizations that the Minister of Finance has
designated as an ERI. Other organizations must apply to the Minister of Finance to be
designated as an ERI. Designation as an ERI will be effective until revoked by the Minister.
An organization or institute should obtain designation before entering into an eligible SR&ED contract. A corporation should ensure that the organization or institute has been
designated before applying for an advance ruling with respect to a contract.
In applying to be designated as an ERI, the applicant should provide information to support
its qualifications as an ERI. This information should include the following:
- details regarding organizational and management structure;
- working agreements and relationships with an Ontario university, college of applied
arts and technology or hospital research institute;
- its sources of funding;
- scientific expertise and experience of key staff;
- how the teaching staff from the hospital and students in the health professions or how
the students, teaching staff or research fellows of an Ontario university or college of
applied arts and technology actively participate in and receive educational benefits
from the SR&ED activities;
- the type of research facilities and services that are used to carry out their research
- a brief description (using non-technical language) of the type of research carried out
and the type of research contracts signed with corporations;
- the name of the person to contact to discuss the application for designation; and
- any other information that could be pertinent to the application.
(See regulation subsections 1101((14) to (20)).
An ERI is a public non-profit research facility described in one of the following paragraphs:
- an Ontario university or Ontario college of applied arts and technology;
- an Ontario Centre of Excellence or a Network of Centres of Excellence;
- a non-profit organization that is an affiliated or federated college or university of an
- a non-profit corporation for scientific research and experimental development defined
in paragraph 149(1)(j) of the ITA, a registered charity defined in paragraph149(1)(f) of
the ITA or a non-profit organization defined in paragraph 149(1)(l) of the ITA that:
- is affiliated with an Ontario university or college of applied arts and technology,
has signed an exchange of information agreement with the institution and
allows students, teaching staff and research fellows to participate in and
receive educational benefits from the SR&ED activities carried on by the nonprofit
corporation or organization;
- is capable of supporting and conducting SR&ED by having the appropriate
facilities and services at its own or the university's or college's premises and
by having qualified employees who have sufficient expertise and experience;
- is not primarily funded by businesses or industries operating in the private
- does not have any member that is a taxable corporation with more than ten per
cent of the votes that may be cast by members, or does not have a single
shareholder that is a taxable corporation who holds shares with more than ten
per cent of the voting rights.
- A non-profit organization that:
- is a non-profit corporation for SR&ED under paragraph 149(1)(j) of the ITA;
- makes all of its expenditures for SR&ED by way of payments to Ontario
universities, Ontario colleges of applied art and technology, an Ontario Centre
of Excellence, a Network of Centres of Excellence or a hospital research
institute described in paragraph 6 below;
- has a board of directors that is appointed or elected only by the institutions
mentioned in (b) above; and
- if it has share capital, all the shares of which are held by ERIs mentioned in (b)
- A hospital research institute that:
- is an Ontario hospital listed in either of group A, D, H, or L in the schedule to
Regulation 964, R.R.O. 1990, under the Public Hospitals Act or under section
32.1 of that Act; or
- is a non-profit corporation for scientific research and experimental
development that is defined in paragraph 149(1)(j) of the ITA, a registered
charity defined in paragraph 149(1)(f) of the ITA or a non-profit organization
defined in paragraph 149(1)(l) of the ITA that is:
- affiliated with an Ontario hospital described in paragraph (a) above with
which it has entered into an agreement so that teaching staff from the
hospital and students in the health professions may actively participate
in and receive educational benefits from the research activities;
- capable of supporting and conducting SR&ED by having the appropriate
facilities and services at its own or the hospital's premises and by
having qualified employees who have sufficient expertise and
- not primarily funded by private sector businesses or industries.
(See CTA subsection 43.9(29) eligible research institute and regulation subsections
1101(10), (11) and (12)).
Funding of the Organization
For the purposes of determining whether or not an organization is primarily funded by the
private sector, the following types of payments made to the organization or corporation shall
not be considered to be funding of the organization or corporation:
- an unconditional donation or gift;
- an amount that is a current or capital SR&ED expenditure to the payer
described in paragraph 37(1)(a) and subparagraph 37(1)(b)(i) of the ITA; and
- an amount advanced as a loan if the lender has the right to receive only
payments on account of principal and interest at a commercially reasonable
(See subsection 1101(13) of the regulations)
4 Eligible Contract
To qualify for the OBRI tax credit, a corporation's qualified expenditures must be made
under an eligible contract.
Definition of Eligible Contract (refer to section 8)
An eligible contract is an agreement between a corporation or partnership and an ERI to
perform SR&ED on behalf of the corporation or partnership if:
- the SR&ED is carried out in Ontario by an ERI and is related to a business carried on
in Canada by the corporation or partnership;
- the corporation or partnership is entitled to exploit the results of the SR&ED carried
out under the agreement;
- the contract is entered into after May 6, 1997; and
- the contract was not made as a substitute for an ineligible contract.
(See CTA subsections 43.9(7) and (8)).
Contracts entered into before May 7, 1997 can qualify if the terms of the contract, as they
read on May 7, 1997, provided that the ERI will continue to carry out SR&ED under the
contract until a date after May 6, 1999.
(See CTA subsection 43.9(7)).
An ERI may have its SR&ED obligations under an eligible contract performed by a whollyowned
non-profit subsidiary or another ERI. If these SR&ED obligations are performed by
these parties after the receipt of the original advance ruling, no further advance ruling will be
required since the activities are deemed to have been carried out by the ERI that is a party
to the eligible contract.
(See CTA subsections 43.9 (22) and (23)).
5 Qualified Expenditure Limit
The OBRI tax credit is calculated as 20% of qualified expenditures incurred after May 6,
1997 in respect of eligible contracts entered into after May 6, 1997 or those eligible
contracts that meet the transitional rule mentioned above.
Total expenditures eligible for the OBRI tax credit are limited to $20 million per year for each
corporation or associated group of corporations. Thus corporations or corporate groups
may receive up to $4 million worth of OBRI tax credit support for their SR&ED expenditures
made under eligible contracts in any one taxation year.
Any unused expenditure limit in a taxation year may not be carried forward to subsequent
years nor carried back to prior years.
The $20 million expenditure limit must be allocated among all members of an associated
group in an agreement to be filed with their tax returns. Where a corporation has not filed
an agreement within 30 days of receiving notice from the Minister that one is required, the
Minister may allocate the expenditure limit among the associated corporations. Where a
corporation has not filed an agreement allocating the expenditure limit and the Minister
makes no allocation to a particular corporation, its expenditure limit will be deemed to be nil.
The expenditure limit must be prorated for taxation years straddling May 6, 1997 based on
the number of days in the taxation year after May 6, 1997.
(See CTA subsection 43.9(21) and regulation subsections 1101(5) to (8)).
6 Qualified Expenditures (refer to section 8)
A qualified expenditure is an expenditure incurred after May 6, 1997 under an eligible
contract including any eligible subcontracts with an ERI that:
- is made as a payment of money (not a payment in kind) under the terms of the
- is confirmed in a ruling from the Minister of Finance to be incurred under a contract
that is consistent with the spirit and intent of the legislation (see section 8 on advance
- is incurred by the corporation for SR&ED carried on in Ontario directly by the ERI;
- is a current expenditure referred to in subparagraphs 37(1)(a)(i), (i.1) or (ii) of the ITA that qualifies for the federal investment tax credit; or
- is a repayment of government assistance to the extent that the repayment has
reduced an OBRI tax credit claim of a previous taxation year.
Qualifying expenditures cannot exceed the amounts that would have been incurred by the
qualifying corporation if it had carried out the SR&ED directly in the same circumstances and
under the same conditions as the ERI.
(See CTA subsections 43.9((9), (10), (19) and (20)).
Qualified expenditures include contract payments within the meaning of subsection 127(9) of
the ITA made to an ERI by a person other than a qualifying corporation if,
- the contract payment is made to the ERI by the person as consideration for the
performance of SR&ED in Ontario for or on behalf of the qualifying corporation; and
- the qualifying corporation, the ERI and the person are all parties to the eligible
(See CTA regulation subsection 1101(2)).
Qualified expenditures for the purposes of the OBRI tax credit are reduced by the amount of
government assistance received in respect of SR&ED. Government assistance means
assistance received from any government, municipality or other public authority that is a
grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other
form of assistance (see subsection 127(9) of the ITA).
The following tax credits are not considered to be government assistance for the purpose of
reducing OBRI qualified expenditures:
- the OBRI tax credit
- the Ontario innovation tax credit
- investment tax credits under subsection 127(5) of the ITA.
For the purposes of the CTA, the amount of the tax credit deducted under section 43.9 is to
be included in the taxpayer's income for tax purposes in the taxation year that gives rise to
(See CTA subsection 43.9(29) government assistance and subsection 44.1(5)).
Contributions received from an ERI
A qualifying corporation's qualified expenditures are to be reduced by the amount of a
contribution if the contribution is received by:
- the qualifying corporation;
- any shareholder of the qualifying corporation;
- any partnership in which the qualifying corporation is a member;
- any other member of that partnership; or
- any person not dealing at arm's length with the qualifying corporation or any shareholder of that corporation;
and is received from:
- an ERI that is a party to the eligible contract;
- a person who performed SR&ED under the contract; or
- any person who does not deal at arm's length with the ERI or person mentioned in
paragraph 2 above.>
(See CTA subsection 43.9(16)).
A contribution is:
- a payment in money, a transfer of ownership of property, an assignment of the use of
property or of a right to use property or any other benefit or advantage other than
property resulting from SR&ED undertaken under the contract;
- a right in the proceeds of disposition of part or all of the intellectual property arising
from SR&ED undertaken under the contract;
- a reimbursement, compensation or guarantee; or
- a loan or loan guarantee.
(See CTA subsection 43.9(29)).
A contribution is not considered to be made by an ERI where it funds any of the SR&ED,
- the financial obligations of the qualifying corporation or partnership in which it is a
member are not reduced by any expenditures made by the ERI;
- the expenditures made by the ERI are not payments to or at the direction of the
corporation or partnership; and
- there is a written agreement between the ERI and all other parties to the contract that
the ERI would be entitled to recover its expenditures.
(See CTA subsection 43.9(17)).
TRANSACTIONS IN THE ORDINARY COURSE OF BUSINESS
The amount of a corporation's or partnership's qualified expenditures will not be adjusted for
transactions made in the ordinary course of business with an ERI if:
- in the case of goods or services acquired from an ERI by the corporation, partnership,
or person not dealing at arm's length with the corporation or partnership the price is
not less than their fair market value; and
- in the case of goods or services provided by the corporation, partnership or person
not dealing at arm's length with the corporation or partnership
- the price is not greater than their fair market value, and
- the expenditures are not part of the ERI's SR&ED expenditures under the
(See CTA subsections 43.9(18)).
A corporation's qualified expenditures are reduced to the extent that its payments fund the
salary of an employee of the ERI who is connected to the corporation. Generally, an
employee will be connected to a corporation if:
- at any time during the term of the eligible contract or during the 24-month period
before the corporation entered into the eligible contract, the employee or a person
who does not deal at arm's length with the employee owned shares of the capital
stock of the qualifying corporation that,
- carry more than 10 per cent of the voting rights attached to securities of the
- have a fair market value of more than 10 per cent of the fair market value of all
of the issued shares of the corporation;
- the employee, either alone or with one or more other employees of any ERI, controls
the corporation directly or indirectly; or
- the employee is an employee of the corporation or a related corporation and there is
an arrangement under which the employee will be employed by the corporation or a
related corporation after the completion of the contract.
In deciding whether a corporation is connected to an ERI or to an employee of an ERI,
options or rights to acquire or redeem shares are deemed to be exercised.
(See CTA subsections 43.9 (9), (26) and (27) and regulation subsection 1101(9)).
The following are not qualified expenditures:
- An expenditure made under an eligible contract after the contract is amended,
unless the Minister gives a favourable ruling with respect to the amended
contract and the expenditure. The ruling must be obtained before the
expenditure is made or is deemed to have been made under subsection
- An expenditure made to an entity that ceases to be an ERI before the
expenditure is incurred.
- An expenditure made under the contract, if:
- incorrect information was provided or any misrepresentation was made
to the Minister of Finance in obtaining a favourable ruling;
- any undertaking given in connection with the application for the ruling is
not fulfilled; or
- information which would have resulted in an unfavourable ruling is not
disclosed to the Minister.
- An expenditure made to a non-profit organization prescribed as an ERI, unless
teaching staff, students or research fellows of a university, college of applied
arts and technology or teaching hospital are significantly involved in carrying
out the SR&ED activities under the contract.
- Expenditures relating to Phase IV Clinical Trials undertaken in the
pharmaceutical industry unless the work is directly in support of prior work
described in paragraphs (a), (b) or (c) of the definition of scientific research
and experimental development in subsection 248 (1) of the ITA and is carried out:
- by the ERI;
- by a wholly-owned non-profit subsidiary of the ERI; or
- by another ERI under a subcontract with the ERI
Phase IV clinical trials are described in Application Policy 96-09 dated September 4, 1996,
issued by the Tax Incentive Audit Section and Scientific Research Section of Revenue Canada.
(See regulation subsections 1101(3) and (4)).
Corporate partners (other than limited or inactive general partners) may claim the OBRI tax
credit in respect of qualified expenditures made by the partnership in its fiscal period ending
in the partner's taxation year. A partner's share of qualified expenditures is the same as its
share of income or loss of the partnership for that fiscal period.
(See subsection 43.9(6) of the CTA).
8 Advance Rulings
To ensure that the parties to an eligible contract fulfill the spirit of the OBRI program,
corporations or partnerships must apply to the Minister of Finance for an advance ruling.
Unlike other requests for advance rulings, there will be no charge for an advance ruling
made under the OBRI tax credit program.
Only expenditures made after the ruling is granted will generally be qualified expenditures.
However, a corporation or partnership may claim the OBRI tax credit in respect of
expenditures incurred before a ruling if it files a request for an advance ruling:
- within 90 days of the later of the date the contract was made and December
18, 1997, the date of Royal Assent of the Tax Credits to Create Jobs Act, 1997
(Bill 164); or
- within three years after the contract was made if the Minister is satisfied that
the corporation or partnership could not apply earlier because of factors
beyond its control.
Where the Minister gives a favourable ruling for an expenditure incurred before the date of
the ruling, the expenditure is considered to be a qualified expenditure for the taxation year in
which the expenditure was incurred. As a transitional measure, to assist taxpayers and to
facilitate the administration of the OBRI program, requests for advance rulings for taxation
years ending before January 1, 2000 will be accepted for consideration if the request is filed
before July 1, 2000.
(See CTA subsections 43.9(10) to (15)).
A corporation applying for an advance ruling should submit a letter requesting an advance
ruling and provide the following information:
- a copy of the SR&ED contract (paper and diskette) with the ERI;
- a summary of the type of business activity carried on by the corporation in Canada
and how this relates to the SR&ED contemplated by the contract;
- a description of the corporation's corporate structure, including
- a list of the names of its shareholders (if less than 25), and
- a list of the corporation's subsidiaries and related corporations;
- details of the ERI's budget for work to be performed under the SR&ED contract;
- details of how the contract will be financed by the corporation (e.g., internal funds,
debt, share issue, etc.);
- confirmation on whether or not any employees of each research institute referred to in
the SR&ED contract have been or are connected to the corporation as contemplated
by section 43.9(26) of the CTA;
- confirmation on whether or not any of the research institutes referred to in the SR&ED contract have been or are connected to the corporation as contemplated by clause
43.9(4)(c) and subsection 43.9(5) of the CTA; and
- any other relevant information and documentation (including diskette copy, if
available) that may reasonably be required in connection with the application for an
advance ruling under the OBRI tax credit program.
Please note that missing or incomplete information may result in delays and/or denials of the
The OBRI tax credit will be applied against outstanding Ontario tax liabilities and the excess
will be refunded. (See CTA subsections 43.9(24) and (25) and 82(3))
For Further Information Please Contact:
1. Applications for advance rulings and applications for designations as an ERI should
be directed to:
Advance Ruling Unit
Corporations Tax Branch
Ministry of Finance
33 King Street West
2. To obtain the required tax form when making a tax claim:
Ministry of Finance
33 King Street West
1 800 263-7965
Fax: 905 433-6998
3. All other enquiries should be directed to
Ministry of Finance
33 King St. W.
General Enquiries: 905 433-6513 or Fax: 905 433-6747
List of Organizations Designated as Eligible Research Institutes
For purposes of the Ontario Business-Research Tax Credit
The following organizations or institutes have been designated as eligible research institutes
for purposes of Ontario Business-Research Tax Credit.
The following Ontario universities are designated as eligible research institutes effective
May 7, 1997:
- Brock University
- Carleton University
- University of Guelph
- Lakehead University
- Laurentian University
- Algoma College
- College de Hearst
- McMaster University
- Nipissing University
- University of Ottawa
- Ontario College of Art && Design
- Queen's University
- Ryerson Polytechnic University
- University of Toronto
- Trent University
- University of Waterloo
- University of Western Ontario
- Wilfred Laurier University
- University of Windsor
- York University
ONTARIO COLLEGES OF APPLIED ARTS and TECHNOLOGY
The following Ontario colleges of applied arts and technology are designated as eligible
research institutes effective May 7, 1997:
- Algonquin College
- Collegé Boréal
- Cambrian College
- Canadore College
- Centennial College
- La Cité Collégiale
- Conestoga College
- Confederation College
- Durham College
- Fanshawe College
- George Brown College
- Georgian College
- Collége des Grands Lacs
- Humber College
- Lampton College
- Loyalist College
- Mohawk College
- Niagara College
- Northern College
- St. Clair College
- St. Lawrence College
- Sault College
- Seneca College
- Sheridan College
- Sir Sandford Fleming College
ONTARIO CENTRES OF EXCELLENCE
The following Ontario centres of excellence are designated as eligible research institutes
effective May 7, 1997:
- Centre for Research in Earth and Space Technology (CREST)
- Communications and Information Technology Ontario (CITO)
- Photonics Research Ontario (PRO)
- Materials and Manufacturing Ontario (MMO)
NETWORKS OF CENTRES OF EXCELLENCE
The following networks of centres of excellence are designated as eligible research
institutes effective May 7, 1997:
- Canadian Arthritis Network
- Canadian Bacterial Diseases Network (CBDN)
- Canadian Genetic Diseases Network (CGDN)
- Canadian Institute for Telecommunications Research (CITR)
- Geomatics for Informed Decisions (The GEOIDE Network)
- Health Evidence Application and Linkage Network (HEAL Net)
- Institute for Robotics and Intelligent Systems (IRIS)
- Intelligent Sensing for Innovative Structures
- Mathematics of Information Technology and Complex Systems (MITACS)
- Mechanical Wood-Pulps Network, Pulp and Paper Research Institute of
- Micronet - Microelectronic Devises, Circuits and Systems
- Protein Engineering Network of Centres of Excellence (PENCE)
- Sustainable Forest Management
- TeleLearning Network of Centres of Excellence
- Canadian Institute for Photonic Innovation
HOSPITAL RESEARCH INSTITUTES
To simplify the administrative aspects of the OBRI program, hospitals that have been
classified as Group A, D, H or L hospitals under the Public Hospitals Act are designated
(effective May 7, 1997) as eligible research institutes without the necessity of having to file
an application with the Ministry of Finance to obtain this status. The hospitals should be
prepared to provide the Ministry of Finance satisfactory proof of their status under the Public
Hospitals Act upon request. For hospitals that are classified as Group A, D, H or L under
the Public Hospitals Act after May 7, 1997, the hospital will be designated effective from the
date it is so classified under that Act. Similarly, hospitals that cease to maintain their
classification Group A, D, H, or L status under that Act will cease to be eligible research
institutes from the date their classification ceased under that Act. As of May 7, 1997, the
following hospitals have been classified as Group A, D, H or L under the Public Hospitals
- Chedoke-McMaster Hospitals
- Hamilton Civic Hospitals
- St. Joseph's Hospital
- Hôtel Dieu Hospital
- Kingston General Hospital
- St. Joseph's Health Centre of London
- University Hospital
- Victoria Hospital
- Children's Hospital of Eastern Ontario
- Ottawa Civic Hospital
- Ottawa General Hospital
- The Hospital for Sick Children
- Mount Sinai Hospital
- St. Joseph's Health Centre
- St. Michael's Hospital
- Sunnybrook Hospital
- The Wellesley Hospital
- Toronto East General and Orthopaedic Hospital
- The Toronto Hospital
- Toronto Women's College Hospital
- North York General Hospital
- The Ontario Cancer Institute (The Princess Margaret Hospital)
- Royal Ottawa Hospital (Adult Psychiatric Unit)
- Clarke Institute of Psychiatry
- The Alcoholism and Drug Addiction Research Foundation (The Clinical
- John P. Robarts Research Institute
- Northern Centre for Advanced Technology
- Fields Institute