Ontario Innovation Tax Credit (OITC)

Eligibility Criteria

This credit is available to all public and private corporations. 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, qualify for the Ontario Innovation Tax Credit (OITC).

The following information is intended as a general guide only.  It is strongly recommended that individuals interested in this tax credit contact the Ontario Ministry of Revenue for details.

For further information:
see the document: Scientific Research and Experimental Development (SR&ED;) Program

Eligible Area

Province of Ontario

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
CT23 Corporations Tax and Annual Return

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;) Carried Out in Canada
Investment Tax Credit - Corporations (2005 and later taxation years)

This document is based on information from Minister of Revenue publications Ontario Innovation Tax Credit (OITC) Claim Form/Guide and the Guide to the CT23 Corporations Tax and Annual Return  at the Minister of Revenue's Tax Revenue Division .

Ontario Contact(s):
Client Accounts and Services Branch
Ontario Ministry of Revenue - MOR
4th Floor
33 King St W
Oshawa, Ontario  L1H 8H5
Fax: 905-433-6998
Toll-free (information): 1-800-262-0784
TTY Toll-free (hearing impaired): 1-800-263-7776