Ontario Research and Development Tax Credit

For taxation years that commence after May 31, 2016, qualifying corporations can claim a 3.5 per cent non‑refundable tax credit on eligible scientific research and experimental development expenditures performed in Ontario. For taxation years that end before June 1, 2016, the tax credit rate is 4.5 per cent. The tax credit rate is prorated for taxation years straddling June 1, 2016. The credit may be applied to reduce Ontario corporate income tax otherwise payable.

This tax credit and the Ontario innovation tax credit may be claimed on the same scientific research and experimental development expenditures.

Do I qualify?

You can claim the tax credit, if the corporation:

  • has a permanent establishment in Ontario
  • carries on 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.

Eligible expenditures

An eligible expenditure:

  • is incurred for scientific research and experimental development carried on in Ontario
  • qualifies under section 127 of the federal Income Tax Act
  • is attributable to a permanent establishment in Ontario.

Eligible expenditures are reduced by government assistance, non-government assistance and contract payments, but not the Ontario Research and Development Tax Credit or federal Scientific Research and Experimental Development Investment Tax Credit. However, the Ontario innovation tax credit is one form of government assistance that reduces eligible expenditures for the tax credit.

Under certain conditions, corporations dealing at non-arm’s length may file an agreement and transfer eligible expenditures.

Claiming the tax credit

Corporations may claim the tax credit on Schedule 508 and file it with their T2 corporation income tax return.

The tax credit can only be used to reduce the Ontario corporate income tax payable.

Download Schedule 508, Ontario Research and Development Tax Credit

Get the Corporation Income Tax return, known as the T2, from the Canada Revenue Agency

Unused tax credit

Any unused portion of the tax credit may be:

  • carried back three years to tax years ending after December 31, 2008
  • carried forward 20 years.

Administration

The Canada Revenue Agency administers the tax credit on behalf of Ontario through the federal income tax system.

Questions

Contact the Canada Revenue Agency with your questions at 1 800 959-5525 or 1 800 665-0354 for teletypewriter (TTY).

Recommended for you

Ontario innovation tax credit

Canada Revenue Agency – Scientific research and experimental development tax incentive program

Page: 2938  |