Ontario research and development tax credit

You can claim this credit if you have a permanent establishment in Ontario and you had eligible expenditures for scientific research and experimental development carried out in Ontario.

The amount of the non-refundable credit is equal to 3.5% of eligible expenditures incurred by a corporation in a tax year that ends on or after June 1, 2016. It was previously 4.5%.

The rate reduction is prorated for tax years straddling May 31, 2016.

The credit may be applied to reduce Ontario corporate income tax that you would otherwise have to pay. An unused credit can be carried back 3 years and can be carried forward 20 years.

Eligibility

Only corporations that are not exempt from Ontario corporate income tax and that have no exempt income can claim the credit.

An eligible expenditure is:

  • an expenditure attributable to a permanent establishment in Ontario of a corporation
  • a qualified expenditure for the purposes of section 127 of the federal Income Tax Act for scientific research and experimental development carried on in Ontario
  • reduced by government assistance, non-government assistance, or contract payments received, entitled to be received, or reasonably expected to be received

For more information on the credit, see sections 38 to 44 of the Taxation Act, 2007 (Ontario).

Claiming the credit

File completed copies of the following with your return:

If the corporation is a member of a partnership and is allocated a portion of the credit as provided for in section 40 of the Taxation Act, 2007 (Ontario), attach a schedule showing the partnership's calculation.

On line 416 of Schedule 5, Tax Calculation Supplementary – Corporations, enter the amount of the credit you are claiming.

Recapture of the credit

A corporation that disposed of a property used in scientific research and experimental development, or converted it to commercial use, may have to report a recapture of any Ontario research and development tax credit previously calculated on that property. Any recapture will create or increase Ontario tax otherwise payable.

To calculate the recapture, complete Schedule 508, Ontario Research and Development Tax Credit.

For more information on the recapture of the credit, see section 45 of the Taxation Act, 2007 (Ontario).

On line 277 of Schedule 5, enter the amount of recapture calculated.

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