Canada Revenue Agency
www.cra.gc.ca
Common menu bar links
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 in respect of 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 was $2 million before February 26, 2008. It has to be prorated for tax years that straddle this date.
Qualifying corporations are eligible to claim the full credit with a qualified expenditure limit of $3 million where their specified capital amount or their federal taxable income in the previous year is not more than $25 million and $400,000 respectively. If one of these amounts exceeds the respective threshold, the $3 million limit is progressively reduced.
For tax years that start after 2009, the $400,000 threshold is increased to $500,000. The $3 million expenditure limit is fully phased out where taxable income in the previous tax year reaches $800,000 (previously $700,000).
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(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
