Research and development is a costly activity for businesses. Luckily, there are tax credits and Research & Development Funding programs that can help lessen the burden on human resources and budgets. One such tax credit is the Ontario Business-Research Tax Credit (OBRTC), which offers 20% of R&D expenses as a refundable tax credit for SR&ED.
Ontario Business-Research Tax Credit Eligibility
Interested companies must operate out of an Ontario location and cannot be exempt from tax under the CTA. The company must also be a member of, or have a partnership with, an eligble research institute (ERI), such as a university or college. However, the company cannot be connected to their ERI partner, such as having shares in the company.
Expenses that qualify under the OBRTC must occur under an eligible contract or subcontract with an ERA that is:
- Made as a payment of money (not a payment in kind) under the terms of the contract;
- Confirmed in a ruling from the Minister of Finance to be incurred under a contract that is consistent with the spirit and intent of the legislation (see section 8 on advance rulings);
- An incurred by the corporation for SR&ED carried on in Ontario directly by the ERI; and
- A current expenditure referred to in subparagraphs 37(1)(a)(i), (i.1) or (ii) of the ITA that qualifies for the federal investment tax credit; or
- A repayment of government assistance to the extent that the repayment has reduced an OBRI tax credit claim of a previous taxation year.
Ontario Tax Credit Limits
The OBRTC provides 20% of a company’s eligible R&D expenditures as a refundable tax credit. A maximum tax credit of $20 million per year can be claimed. This amount must be allocated among all of the members of the associated group. If you would like more information about this helpful tax credit, please contact Mentor Works, or visit the Ontario Ministry of Finance website for more details.