Ontario Innovation Tax Credit
Highlights
This program is designed for businesses like yours that are engaged in scientific research and experimental development in Ontario. By applying, you can receive a refundable tax credit for your qualified expenditures. This means you can get back a portion of the money you spend on innovation, which can significantly reduce your overall costs.
Why Apply?
- Receive up to $240,000 in tax credits for expenditures on scientific research and experimental development.
- Boost your cash flow by getting a refund on your eligible expenses, allowing you to reinvest in your business.
- Government-backed support ensures reliability and trustworthiness, making it a safer option compared to other financing methods.
Benefits to Your Business
- Easier qualification compared to other programs, as long as you meet the basic criteria.
- Enhance your innovation efforts without straining your budget.
- Strengthen your competitive edge by investing in new technologies and processes.
Applying for this program can provide the financial support you need to drive your business forward. Take advantage of this opportunity to innovate and grow with the help of government-backed funding.
Financing Details
Type of Financing: Tax Credit
Repayment Terms and Interest Rates:
- This is a refundable tax credit, not a loan. Therefore, there are no repayment terms or interest rates.
Eligible Expenses:
- Expenditures on scientific research and experimental development (SR&ED) performed in Ontario.
- Must qualify under section 127 of the federal Income Tax Act (Canada).
- Includes 40% of capital expenditures made prior to 2014 and 100% of current expenditures.
- Capital expenditures made after December 31, 2013, are no longer qualified expenditures.
Use of Funds:
- Funds can be used for SR&ED activities carried out in Ontario.
- Must be incurred when the corporation has a permanent establishment in Ontario and is attributable to that establishment.
Restrictions on Use of Funds:
- Funds cannot be used for capital expenditures made after December 31, 2013.
- Qualified expenditures are reduced by government assistance, non-government assistance, and contract payments.
Fees:
- There are no fees associated with claiming this tax credit.
Qualifications
- Must have a permanent establishment in Ontario.
- Must carry out scientific research and experimental development in Ontario during the year.
- Must be eligible to claim the federal investment tax credit under section 127 of the federal Income Tax Act (Canada).
- Must not be exempt from corporation income tax.
Must have filed a scientific research and experimental development expenditures claim on federal form T661 for the tax year.
Disqualifications:
- Federal taxable income of the prior tax year exceeds $800,000.
- Prior year’s taxable capital exceeds $50 million.
Description
This program offers your business a refundable tax credit for expenses related to scientific research and experimental development in Ontario.
You can receive up to $240,000 for each tax year starting after May 31, 2016. This money can be used for various qualified expenditures, such as salaries, materials, and overhead costs directly related to your research and development projects.
The tax credit rate is 8% for qualified expenses. If your business had a tax year that straddles June 1, 2016, the rate is prorated. For tax years ending before June 1, 2016, the rate is 10%.
This program is a great way to support your innovation efforts, reduce your tax burden, and invest more in your business's future growth.
Program Steps
Download Necessary Forms:
- Obtain Schedule 566, Ontario Innovation Tax Credit.
- Get the T2 Corporation Income Tax return from the Canada Revenue Agency.
Prepare Documentation:
- Federal form T661 for Scientific Research and Experimental Development (SR&ED) expenditures.
- Financial statements for the tax year.
- Details of scientific research and experimental development activities conducted in Ontario.
- Records of qualified expenditures, including 40% of capital expenditures made prior to 2014 and 100% of current expenditures.
- Documentation of any government or non-government assistance received.
Complete Schedule 566:
- Fill out Schedule 566 with details of your qualified expenditures.
- Ensure all information is accurate and complete.
File T2 Corporation Income Tax Return:
- Attach the completed Schedule 566 to your T2 Corporation Income Tax return.
- Submit the T2 return to the Canada Revenue Agency.
Review and Submit:
- Double-check all forms and documentation for accuracy.
- Submit the completed application to the Canada Revenue Agency.
Follow Up:
- Contact the Canada Revenue Agency if you have any questions or need assistance.
- Keep records of your submission and any correspondence for future reference.