The 2016 Ontario Budget received Royal Assent on April 19, 2016. Learn more about changes to the Ontario Innovation Tax Credit.
Eligible corporations can claim a 10 per cent refundable tax credit for qualified expenditures on scientific research and experimental development performed in Ontario.
This tax credit and the Ontario research and development tax credit may be claimed on the same scientific research and experimental development expenditures.
How much money could I receive?
The maximum tax credit is $300,000 based on an expenditure limit of $3 million. 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
- 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?
You can claim the 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
- is not exempt from corporation income tax
- has filed a scientific research and experimental development expenditures claim on federal form T661 for the tax year.
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
- is incurred when the corporation has a permanent establishment in Ontario and the expenditure is attributable to that permanent establishment
- includes 100 per cent of current expenditures and 40 per cent of capital expenditures made prior to 2014
- capital expenditures made after December 31, 2013 no longer are qualifying 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.
Claiming the tax credit
Corporations may claim the tax credit on Schedule 566 and file it with their T2 corporation income tax return.
Download Schedule 566, Ontario Innovation Tax Credit
Get the Corporation Income Tax return, known as the T2, from the Canada Revenue Agency
The Canada Revenue Agency administers the program on behalf of Ontario through the federal income tax system.
Contact the Canada Revenue Agency with your questions at 1 800 959‑5525 or 1 800 665ᑙ0354 for teletypewriter (TTY).
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