SR&ED in Ontario
Federal SR&ED Tax Credits
Through the Scientific Research and Experimental Development (SR&ED) tax credit, qualified Canadian-Controlled Private Corporations (CCPCs) can receive a refund of up to 35% on eligible expenditures incurred in the development of new or improved products or processes. Foreign owned or public corporations can qualify for a 15% tax credit on eligible expenditures.
In Ontario, additional provincial tax credits on qualified SR&ED expenditures include the Ontario Research and Development Tax Credit (ORDTC) and Ontario Innovation Tax Credit (OITC), among others. These provincial tax credits operate in conjunction with the federal SR&ED program.
Ontario Provincial SR&ED Tax Credits
Ontario Innovation Tax Credit (OITC)
The OITC is a refundable tax credit available to public and private corporations that are performing SR&ED in Ontario and are eligible for the federal SR&ED Investment Tax Credit (ITC).
- Amount: 10% up to $300,000 with a $3M expenditure limit*;
- Eligible Costs: SR&ED expenditures; 40% of capital expenditure costs made prior to 2014;
- Criteria: Companies performing SR&ED in a permanent establishment in Ontario during the year who have filed an SR&ED expenditures claim on federal form T661 for the tax year;
- Additional Info: The OITC is claimed on Schedule 566 and filed with the T2 corporation income tax return. The OITC and ORDTC may be claimed on the same SR&ED expenditures.
*$3M Annual expenditure limit is phased out if taxable paid-up capital (PUC) for previous year is between $500,000-$800,000 or exceeds $25M; the expenditure limit is eliminated when PUC reaches $50M.
Ontario Research and Development Tax Credit (ORDTC)
The ORDTC is a non-refundable tax credit available to qualifying corporations on eligible SR&ED expenditures performed in Ontario to reduce provincial income tax payable.
- Amount: 4.5% non-refundable;
- Eligible Costs: SR&ED expenditures;
- Criteria: SR&ED activities must be attributable to a permanent establishment in Ontario;
- Additional Info: The ORDTC is claimed on Schedule 508 and filed with the T2 corporation income tax return.
