Ontario innovation tax credit
Enhancements to the Ontario innovation tax credit have been announced. Go to What's New for Corporations.
You are eligible to claim an Ontario innovation tax credit if you meet all of the following criteria:
- you had a permanent establishment in Ontario during the year
- you have carried on scientific research and experimental development (SR&ED) in Ontario during the year
- you are not exempt from tax under Part III of the Taxation Act, 2007 (Ontario)
- you are eligible to claim a federal investment tax credit under section 127 of the federal Income Tax Act for the corporation's qualified expenditures
- you have filed form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim, and Schedule 31, Investment Tax Credit – Corporations, in the tax year
The credit is an 8% refundable tax credit based on the sum of the corporation's qualified expenditures incurred in Ontario and any eligible repayments. The rate was 10% for expenditures incurred in tax years that end before June 1, 2016.
If the rate changes during the tax year, you have to base your calculation on the number of days in the year that each rate is in effect.
The credit is available to a maximum annual expenditure limit of $3 million. Associated corporations must share in the $3 million expenditure limit.
The expenditure limit of $3 million begins to reduce when the federal taxable income of the corporation and its associated corporations for the previous tax year exceeds $500,000 and becomes nil at $800,000.
The expenditure limit of $3 million also begins to reduce when the specified capital amount of the corporation and its associated corporations for the previous tax year reaches $25 million and becomes nil at $50 million.
Qualified expenditures include 40% of capital expenditures incurred before 2014 and 100% of current expenditures.
Expenditure limit, qualified expenditure, and eligible repayments are defined in subsections 96(3.1), 96(8), and 96(12) of the Taxation Act, 2007 (Ontario).
Claiming the credit
File a completed Schedule 566, Ontario Innovation Tax Credit, with your return.
For more information on the credit, see the schedule and section 96 of the Taxation Act, 2007 (Ontario).
On line 468 of Schedule 5, Tax Calculation Supplementary – Corporations, enter the amount of the credit you are claiming.
Forms and publications
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