Ontario Research and Development Tax Credits for Small Businesses

Small Businesses in Canada operate with a wide variety of options to choose from regarding government incentives for Scientific Research and Experimental Development Programs (SR&ED). The government realizes the potential benefits of R&D projects along with the risks and costs associated with it. Therefore, the Canadian Government has released various tax credits which can be stacked with government funding incentives to promote Research and Development projects in Ontario.

Some of the more popular tax incentives include:

Ontario Innovation Tax Credit (OITC)

• Provincially Administered ;
• Applicable to Canadian Corporations, Private Proprietorships, and small businesses ;
• 10% refundable tax credit or up to $3 million of SR&ED expenses ;
• Expenses include 100% of Current Expenses and 40% of Capital Expenses ;
• Activities must be carried out in Ontario.

Ontario Business-Research Institute Tax Credit (OBRI)

• Provincially Administered ;
• 20% or up to $4 million refundable tax credit for SR&ED expenditures ;
• Applicable to Canadian Corporations, Private Proprietorships, and small businesses ;
• Research must be carried out with an Eligible Research Institute (A Canadian College or University) ;
• Stackable with the OITC program for a 30% tax credit ;
• Activities must be carried out in Ontario.

SR&ED Tax Incentive Program  (ITC)

• Federally Administered ;
• 20-35% or up to $3 Million of refundable/non-refundable SR&ED tax incentives ;
• Applicable to Canadian Corporations as well as Private Proprietorships ;
• Eligible Areas of Activity: Experimental Development, Applied Research, Basic Research, Support Work (engineering, design, operations research) ;
• Activities must be Carried out in Canada.

Ontario Research and Development Tax Credit (ORDTC)

• Provincially Administered ;
• 4.5% non-refundable tax credit on SR&ED expenditures ;
• Applicable to Canadian Corporations ;
• Unused credits can be applicable to income tax from previous years ;
• Activities must be carried out in Ontario.

Ontario Tax Exemption for Commercialization (OTEC)

• Provincially Administered ;
• 10 year tax exemption ;
• Applicable to Canadian Corporations ;
• Businesses must commercialize intellectual property that is developed by Canadian Post-Secondary Institutions.

Taking Advantage of SR&ED Government Funding Programs

Research and Development does not have to be a risky and costly process. Businesses are able to implement Government Funding for Research and Development along with Tax Incentives to relieve some of the burden. Those who are interested in the tax credits or government funding programs mentioned in today’s blog should contact one of our Government Funding Experts or go to the Canada Revenue Agency Website. If you are interested in learning more about Small Business Funding Programs, please sign up for one of our Free 60 Minute Government Funding Workshops or subscribe to our Blog.