Ontario Innovation Tax Credit (OITC)

Eligibility Criteria

Summary

What is the Ontario Innovation Tax Credit (OITC)?
The OITC is a 10% refundable tax credit for qualifying public and private corporations [prior to May 5, 1999 only qualifying Canadian-controlled private corporations (CCPCs) were eligible] having a permanent
establishment in Ontario.

The OITC is calculated on qualifying expenditures (annual maximum of $2,000,000) made in the taxation year for Scientific Research and Experimental Development (SR&ED) carried on in Ontario that are
eligible for the federal investment tax credit.

Corporations are eligible to claim the full OITC where their Ontario taxable paid-up capital and federal taxable income in the preceding taxation year do not exceed $25 million and $200,000 respectively. The annual qualifying expenditure limit of $2,000,000 is progressively reduced for those corporations:

• whose taxable paid-up capital or “adjusted taxable paid-up capital” in the preceding taxation year, is greater than $25 million but less than $50 million, and
• whose federal taxable income is more than $200,000 but less than $400,000 in the preceding taxation year.

If the corporation is part of an associated group, the taxable paid-up capital and federal taxable income of those corporations must also be included in the determination of the annual qualifying expenditure limit.

Credit unions and insurance corporations are required to use taxable paid-up capital employed in Canada as determined for the federal large corporations tax instead of “taxable paid-up capital” or “adjusted taxable paid-up capital”

How Do I Claim OITC?
To claim the OITC, a corporation must file an Ontario corporate tax return (CT23 or CT8). Corporations that qualify for Exempt From Filing (EFF) status are required to file a CT23 tax return for any year in which a claim for the OITC is made.

Corporations claiming the OITC in a taxation year must submit a copy of their federal T2 tax return, including the federal T2 SCH 31 and federal form T661 (excluding related technical documentation).

Only expenditures for scientific research and experimental development (SR&ED), carried on in Ontario, for which the taxpayer is eligible for federal SR&ED investment tax credit (ITC), qualify for the OITC..

For further information:
visit these Web sites:
Corporations
http://www.trd.fin.gov.on.ca/userfiles/HTML/cma_3_43216_1.html
2004/2005 CT23 Corporations Tax and Annual Return
http://www.trd.fin.gov.on.ca/userfiles/page_attachments/Library/3/ctie_CT23EL_Guide.pdf?N_ID=3 

How is OITC Calculated?
The OITC is calculated at 10% of qualifying expenditures. Qualifying expenditures are 100% of current expenditures and 40% of capital expenditures.

The OITC is available on qualifying SR&ED expenditures to a maximum of $2 million annually. The expenditure limit is reduced for short taxation years based on the number of days in the taxation year is of 365 (366 if includes a leap year). Associated companies must share this $2 million limit.

For further information:
visit these web sites:
Claim for Scientific Research and Experimental Development (SR&ED) in Canada
http://www.cra-arc.gc.ca/E/pbg/tf/t661/README.html 
Investment Tax Credit - Corporations (2004 and later taxation years)
http://www.cra-arc.gc.ca/E/pbg/tf/t2sch31/README.html  

• Important Notices

Ontario Contact(s):
Corporations Tax Branch
Ministry of Finance - MOF
33 King Street West
P.O. Box 622
Oshawa, Ontario  L1H 8H6
Telephone: (905) 433-6500
Fax: (905) 433-6998
Toll-free (information): 1-800-262-0784