Ontario SR&ED and technology credits
R&D Tax Update, January 2008 (08-1)
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Canada’s federal incentive program for scientific research and experimental development (SR&ED) is among the richest programs supporting R&D in the world. In addition, many provincial SR&ED and related credits exist to further enhance these incentives. This newsletter summarizes the nature and criteria for claiming provincial credits in Ontario. The credits for other provinces will be addressed in upcoming newsletters.
OITC - Ontario innovation tax credit
Corporations with a permanent establishment (PE) in Ontario and performing SR&ED in Ontario may claim an Ontario innovation tax credit (similar to the federal investment tax credit), of 10% on qualifying SR&ED expenditures. This refundable tax credit is available to all corporations subject to certain limitations on taxable income and taxable capital. Further benefits of conducting SR&ED in Ontario is that receipt of the federal investment tax credit (ITC) is presently not taxable for Ontario purposes, and the Ontario innovation tax credit, unlike the federal ITC, is not subject to an 18 months filing deadline.
ONTTI - Ontario new technology tax incentive gross-up
The ONTTI allows taxpayers a 100% immediate write-off of the eligible cost of qualifying intellectual properties acquired from third parties for the purpose of implementing an innovation or an invention in the company’s business in Ontario. Qualifying intellectual property is a patent, a license, a permit, know-how, a commercial secret, a process, a formula or other similar property constituting knowledge.
OCASE - Ontario computer animation and special effects tax credit
Ontario provides a 20% refundable tax credit for Ontario labour expenditures for activities carried out in respect of computer digital animation and digital visual effects for use in television or film. The activities must be carried out at a PE in Ontario for commercially exploitable film and television productions. Ontario expenditures may be reduced by certain related government assistance, but are not reduced by the Ontario film and television tax credits (OFTTC) which may be claimed concurrently. A certificate of eligibility must be obtained from the Ontario Media Development Corporation and filed with the CT23 return.
OIDMTC - Ontario interactive digital media tax credit
Ontario provides a 30% refundable tax credit for small corporations (defined as having less than $20 million in revenue and $10 million in assets) for Ontario labor expenditures incurred to create interactive digital media products. Alternatively, all corporations not meeting the small corporation criteria are eligible for a 20% credit. The products must be developed by a corporation at a PE in Ontario for the purpose of commercial exploitation. In addition, up to $100,000 of qualifying marketing and distribution expenditure directly related to an eligible product may be claimed for the credit.
OBRI - Ontario business research institute tax credit
The OBRI is a 20% refundable tax credit based on SR&ED expenditures incurred in Ontario as part of an eligible research institute contract. An eligible research institute contract is an SR&ED contract between a taxpayer carrying on business through a PE in Ontario and an eligible research institute when the SR&ED is carried out in Ontario, is related to the taxpayer’s business and the taxpayer is entitled to exploit the results of the SR&ED. An eligible research institute includes most universities and colleges in Ontario, hospital research institutes and certain non-profit research organizations. It is possible to qualify for the OBRI tax credit and the OITC on the same expenditures.
About R&D Tax Update
Opportunities, issues and developments affecting the federal and provincial scientific research and experimental development tax incentive programs.