Ontario innovation tax credit

You are eligible to claim an Ontario innovation tax credit if you:

• had a permanent establishment in Ontario during the year;
• have carried on scientific research and experimental development (SR&ED) in Ontario during the year;
• are not exempt from tax under Part III of the Taxation Act, 2007 (Ontario);
• are eligible to claim a federal investment tax credit under section 127 of the federal Income Tax Act for the corporation's qualified expenditures; and
• have filed Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim, in the tax year.

The credit is a 10% refundable tax credit based on the sum of the corporation's qualified expenditures incurred in Ontario and any eligible repayments.

The credit is available to a maximum annual expenditure limit of $3 million. Associated corporations must share in the $3 million expenditure limit.

The expenditure limit of $3 million begins to reduce when the federal taxable income of the corporation and its associated corporations for the previous tax year exceeds $500,000 ($400,000 for tax years that end before 2010) and becomes nil at $800,000 ($700,000 for tax years that end before 2010).

The $3 million expenditure limit also begins to reduce when the specified capital amount of the corporation and its associated corporations for the previous tax year reaches $25 million and becomes nil at $50 million.

Qualified expenditures include 100% of current expenditures and 40% of capital expenditures.

Expenditure limit, qualified expenditure, and eligible repayments are defined in subsections 96(3), 96(3.1), 96(8), and 96(12) of the Taxation Act, 2007 (Ontario).

Claiming the credit

To claim the credit, file a completed Schedule 566, Ontario Innovation Tax Credit, with your return.

For more information on the credit, see the schedule and section 96 of the Taxation Act, 2007 (Ontario).

On line 468 of Schedule 5, Tax Calculation Supplementary - Corporations, enter the amount of the credit you are claiming.

Forms and Publications

• Schedule 5, Tax Calculation Supplementary - Corporations
• Schedule 566, Ontario Innovation Tax Credit
• Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim

Government partners

• Ontario (Ministry of Revenue)
• Ontario (e-Laws)