Ontario Scientific Research and Experimental Development (SR&ED) Tax Credit Programs

Funding Amount

OITC and ORDTC follow the federal SR&ED rules for eligible expenses and activities, while OBRITC is for payments made to eligible research institutes (ERIs). The 8% OITC and 20% OBRITC are refundable tax credits, while the 3.5% ORDTC is non-refundable that can be applied towards Ontario taxes payable.

What is important for eligible businesses to know is that funding through these programs stack. Your businesses may be eligible for funding through all three programs for the same underlying expenditures. The programs are available for all open tax years, with OITC and ORDTC contingent on filing a federal SR&ED claim within 18 months of year end.

Ontario Innovation Tax Credit (OITC):

• Receive up to 8% refundable tax credits on a maximum annual expenditure limit of $3 million.

• The maximum tax credit amount is $240,000.

• The expenditure limit is gradually reduced if:

  • Federal taxable income of the prior tax year exceeds $500,000 and is eliminated at $800,000; or

  • The prior year’s taxable capital exceeds $25 million and is eliminated at $50 million.

• OITC is considered government assistance and will reduce the federal pool of deductible SR&ED expenditures and qualified SR&ED expenditures.

Ontario Business-Research Institute Tax Credit (OBRITC):

• Receive up to 20% refundable tax credit on qualified expenditures of up to $20 million annually.

• The maximum annual tax credit a business can receive is $4 million.

• OBRITC is considered government assistance and will reduce the federal pool of deductible SR&ED expenditures and qualified SR&ED expenditures.

Ontario Research and Development Tax Credit (ORDTC):

• Receive up to 3.5% non-refundable tax credit towards eligible activities.

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

• Any unused portion of the tax credit may be carried back three tax years and/or carried forward 20 tax years.

• ORDTC is considered government assistance and will reduce the federal pool of deductible SR&ED expenditures and qualified SR&ED expenditures.

Eligible Applicants

These government tax credits are available to Ontario businesses. Many of the eligibility requirements for these programs require that the business is eligible for tax credits through the federal SR&ED funding program:

Ontario Innovation Tax Credit (OITC):

• Businesses operating either basic research, applied research, or experimental development in Ontario; and

• Applicants should be developing new products, processes, or making incremental improvements to them.

Ontario Business-Research Institute Tax Credit (OBRITC):

• Businesses (including partnerships) that have contracted with eligible research institutes (ERIs) to perform SR&ED on their behalf.

Ontario Research and Development Tax Credit (ORDTC):

• Businesses (including partnerships) in Ontario engaged in either basic research, applied research, or experimental development; and

• Applications should involve the development of new products or improvements to existing products or processes.

Eligible Activities

OITC and ORDTC follow the federal SR&ED rules for eligible expenses and activities, OBRITC is for payments made to eligible research institutes (ERIs). Many of the expenses shown here are similar to the expenses that the business can get funded through the federal SR&ED funding program, and can be stacked with one or more of these provincial variations.

Ontario Innovation Tax Credit (OITC):

• Labour: Based on time spent on eligible activities in Ontario.

• Contractors: Portion of contract related to SR&ED performed on the business’ behalf. Must be a Canadian contractor and work must be performed within the province of Ontario.

• Third Party Payments: Payments (money or in-kind) to an entity to carry on SR&ED in the province of Ontario.

• Materials: Materials can be purchased from outside Ontario but must be used in the prosecution of SR&ED in Ontario.

• Overhead: Calculated using the Proxy (Quick) or Traditional (Detailed) method.

Ontario Business-Research Institute Tax Credit (OBRITC):

• Payments of money (not payments-in-kind) made to eligible research institutes (ERIs) where there is agreement between the corporation and the ERI to perform SR&ED on behalf of the corporation (labour and materials);

• Expenses must be related to a Canadian business or corporation and their activities taking place in Ontario; and

• The corporation must be entitled to exploit the results of the SR&ED carried out under the agreement.

Ontario Research and Development Tax Credit (ORDTC):

• Labour: Based on time spent on eligible activities in Ontario.

• Contractors: Portion of contract related to SR&ED performed on the business’ behalf. Must be a Canadian contractor and work must be performed in this province.

• Third Party Payments: Payments (money or in-kind) to an entity to carry on SR&ED in the province of Ontario.

• Materials: Materials can be purchased from Canadian or non-Canadian suppliers.

• Overhead: Calculated using the Proxy or Traditional method.

Program Deadline

The Ontario SR&ED programs are available for all open tax years, with OITC and ORDTC contingent on filing a federal SR&ED claim within 18 months of the year-end.

Ontario Innovation Tax Credit (OITC):

Available for all open tax years, contingent on filing a federal SR&ED claim within 18 months of the year-end.

Ontario Business-Research Institute Tax Credit (OBRITC):

Available for all open tax years, with no requirement to file a federal SR&ED claim.

Ontario Research and Development Tax Credit (ORDTC):

Available for all open tax years, contingent on filing a federal SR&ED claim within 18 months of the year-end.

To determine whether your business is eligible for benefits through the Scientific Research and Experimental Development (SR&ED) tax credits, consider speaking with the Ryan team of Canadian SR&ED consultants.