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Ontario

Ontario

The basic rate of income tax is 11.5%.

You can use Schedule 500, Ontario Corporation Tax Calculation, to calculate your Ontario basic income tax. Schedule 500 is a worksheet and you do not have to file it with your return.

On line 270 of Schedule 5, enter the amount of basic income tax calculated.

Ontario small business deduction

The deduction reduces the Ontario basic income tax of a corporation that was a CCPC throughout the tax year. It is calculated by multiplying the corporation's Ontario small business income for the tax year by the small business deduction rate (8.3%) for the year, resulting in a lower tax rate of 3.2%.

The Ontario small business deduction is phased out for CCPCs (including associated corporations) with taxable capital employed in Canada of more than $10 million in the previous tax year. It is completely eliminated when the taxable capital is $50 million or more in the previous tax year. For tax years starting before April 7, 2022, the amount was $15 million. This is referred to as the taxable capital business limit reduction.

The Ontario small business limit is not subject to the federal passive income business limit reduction. As such, eligible Ontario small businesses can receive the Ontario small business deduction regardless of the amount of passive income they earned. See page 78.

When calculating the Ontario small business income, the corporation's Ontario domestic factor is the ratio of the corporation's Ontario taxable income to the corporation's taxable income earned in all provinces and territories.

You can use Part 2 of Schedule 500, Ontario Corporation Tax Calculation, to calculate the deduction. Schedule 500 is a worksheet and you do not have to file it with your return.

On line 402 of Schedule 5, enter the small business deduction amount.

Ontario transitional tax debits and credits

The Ontario transitional tax debits and credits have provided a transition from the Corporations Tax Act (Ontario) for corporations with different income tax attributes for federal and Ontario purposes.

For tax years ending before 2009, a corporation's income and taxable income for Ontario purposes were determined based on its Ontario tax pools (for example, the undepreciated capital cost of depreciable property) under the Corporations Tax Act (Ontario).

For tax years ending after 2008, the corporation's income and taxable income for Ontario purposes are determined based on its federal tax pools under the Taxation Act, 2007 (Ontario).

If the corporation's federal tax pools exceeded its Ontario tax pools, the corporation had a transitional tax debit. A specified corporation subject to the Ontario transitional tax debit was generally required to pay additional Ontario corporate income tax over a five-year period beginning with its first tax year ending after 2008.

Although the five-year period has ended, it is still possible to have a transitional tax debit since, after 2015, the corporation can continue to defer the transitional tax debits as long as it does not claim an SR&ED tax deduction and the SR&ED expenditure pool is not reduced by government assistance.

Conversely, where the corporation's Ontario tax pools exceeded its federal tax pools, the corporation had a transitional tax credit. A specified corporation was generally entitled to a transitional tax credit over a five-year period beginning with its first tax year ending after 2008. You can no longer claim this credit.

A specified corporation is defined under subsection 46(5) of the Taxation Act, 2007 (Ontario).

Complete Schedule 506, Ontario Transitional Tax Debits and Credits, to calculate the corporation's transitional tax debits.

Use Schedule 507, Ontario Transitional Tax Debits and Credits Calculation, to determine the amounts to enter in Part 3 of Schedule 506.

File Schedule 506 with the return. Schedule 507 does not have to be filed with the return.

On line 276 of Schedule 5, enter the total transitional tax debits.

Ontario corporate minimum tax

The Ontario corporate minimum tax payable is equal to the amount by which the corporate minimum tax exceeds the Ontario corporate income tax.

A corporation is subject to corporate minimum tax if its total assets are $50 million or more and its total revenue is $100 million or more except if the corporation was, throughout the tax year, one of the following:

• a corporation exempt from income tax under section 149 of the federal Income Tax Act

• a mortgage investment corporation

• a deposit insurance corporation under subsection 137.1(5) of the federal Income Tax Act

• a congregation or business agency to which section 143 of the federal Income Tax Act applies

• an investment corporation

• a mutual fund corporation

The corporate minimum tax rate is 2.7%.

In determining if the total assets or total revenue exceeds the limits, a corporation must include its share of the total assets and total revenue of a partnership in which it has an interest, any associated foreign or Canadian corporation, and any associated corporation's share of a partnership.

If a corporation is associated it must complete and file Schedule 511, Ontario Corporate Minimum Tax - Total Assets and Revenue for Associated Corporations, to report the total assets and total revenue of all the associated corporations.

File Schedule 510, Ontario Corporate Minimum Tax, with your T2 return if one of the following applies:

• the corporation is subject to corporate minimum tax for the tax year (Part 1 of the schedule)

• the corporation is not subject to corporate minimum tax in the year, but is deducting a corporate minimum tax credit or has a corporate minimum tax credit carryforward (see page 111), corporate minimum tax loss carryforward, or current year corporate minimum tax loss (Parts 4 to 8 of the schedule)

• the corporation has special additional tax on life insurance corporations payable in the year even if it is not subject to corporate minimum tax for the tax year (Part 4 of Schedule 510, and Schedule 512, Ontario Special Additional Tax on Life Insurance Corporations [SAT])

Corporate minimum tax is based on the adjusted net income of a corporation. The adjusted net income is a corporation's net income calculated in accordance with Canadian generally accepted accounting principles or the International Financial Reporting Standards, with various adjustments. The adjustments are reported in Part 2 of Schedule 510.

Accounting gains reported in the year from corporation reorganizations that are deferred for income tax purposes are deductible when calculating adjusted net income.

Accounting gains reported in the year on the transfer of property under section 85, section 85.1, section 97, subsection 13(4), and/or section 44 of the federal Act are deductible when calculating adjusted net income. An election is required in order to claim this deduction. The CRA will consider a corporation to have filed an election (and to not need to file another document) if it reports the deduction and has filed the election(s) required for corporate income tax purposes.

In addition, certain unrealized mark-to-market gains/losses and foreign currency gains/losses on assets that are not required to be included in computing income for income tax purposes are not included in adjusted net income. For additional information see Ontario Regulation 37/09.

File a completed Schedule 510 with your return and, if applicable, Schedule 511.

On line 278 of Schedule 5, enter the amount of the corporate minimum tax.

References
Division C, Sections 54 to 62 Taxation Act, 2007 (Ontario)

Corporate minimum tax loss carryforward

A corporate minimum tax loss may be carried forward 20 years.

Upon amalgamation under section 87, only corporate minimum tax losses from predecessors who are not controlled by predecessors in the amalgamated group can be transferred to a new corporation. On a vertical amalgamation of a parent and subsidiary corporations, only the loss from the parent may be transferred to the new corporation. The subsidiary's loss may not be transferred to the parent.

Upon winding up a subsidiary under subsection 88(1), the subsidiary's corporate minimum tax loss may not be transferred to a parent corporation.

Calculate the carry-forward amount in Part 7 of Schedule 510, Ontario Corporate Minimum Tax.

Ontario special additional tax on life insurance corporations

A life insurance corporation carrying on business in Ontario at any time in the tax year is subject to the Ontario special additional tax on life insurance corporations.

The special additional tax payable for a tax year is equal to the amount by which:

• 1.25% of the corporation's taxable paid-up capital multiplied by the number of days in the tax year divided by 365

is more than

• the total of the corporation's Ontario corporate income tax and corporate minimum tax payable for the year

Use Schedule 512, Ontario Special Additional Tax on Life Insurance Corporations (SAT), to calculate the tax payable.

The special additional tax paid for a tax year is added to the corporation's corporate minimum tax credit carryforward. This credit may be deducted to reduce Ontario corporate income tax payable in future years. For more information, see "Ontario Corporate Minimum Tax Credit" on page 111. Enter the special additional tax payable for the tax year in Part 4 of Schedule 510, Ontario Corporate Minimum Tax.

Life insurance corporations that are subject to the special additional tax and related, at the end of the tax year, to another life insurance corporation carrying on business in Canada must use Schedule 513, Agreement Among Related Life Insurance Corporations (Ontario), to allocate the capital allowance among the members of the related group.

File Schedule 512 and, if applicable, Schedule 513, with your return.

On line 280 of Schedule 5, enter the amount of special additional tax payable.

Reference
Section 63, Taxation Act, 2007 (Ontario)

Ontario political contributions tax credit

You can claim a tax credit on contributions made before January 1, 2017, to Ontario registered parties, registered constituency associations, or registered candidates as defined under the Ontario Election Finances Act.

Generally, this non-refundable credit is calculated by multiplying the basic tax rate (see page 107) by the amount of Ontario political contributions, up to an annual maximum indexed according to the Election Finances Act. The credit is effective for tax years ending after December 31, 2008. It replaces the previous deduction for political contributions administered by the province.

You can carry forward unused contributions, including those from pre-2009 tax years, for up to 20 years. There are no carry-back provisions.

You do not have to file official receipts with your return. However, keep them in case the CRA asks for them later.

The CRA can accept photocopies only if the issuer certifies them as true copies.

File a completed Schedule 525, Ontario Political Contributions Tax Credit, with your return.

On line 415 of Schedule 5, enter the amount of the credit you are claiming.

Reference
Section 53.2, Taxation Act, 2007 (Ontario)

Ontario tax credit for manufacturing and processing

You can claim the Ontario tax credit for manufacturing and processing if the corporation had both:

• Ontario taxable income during the tax year

• eligible Canadian profits from manufacturing and processing, farming, fishing, logging, mining, the generation of electrical energy for sale, or the production of steam for sale

You cannot claim this credit on the corporation's income that is subject to the Ontario small business deduction rate.

To claim the credit, file a completed Schedule 502, Ontario Tax Credit for Manufacturing and Processing, with the return.

On line 406 of Schedule 5, enter the amount of the credit you are claiming.

Reference
Section 33, Taxation Act, 2007 (Ontario)

Ontario credit union tax reduction

The Ontario credit union tax reduction allows credit unions a special deduction from income tax otherwise payable. It is designed to reduce their overall income tax rate to the same net rate paid by small business corporations that claim the Ontario small business deduction.

To be eligible to claim the Ontario credit union tax reduction, the credit union must meet the following criteria:

• have been a credit union throughout the tax year

• have had a permanent establishment in Ontario at any time in the tax year

• have Ontario taxable income in the year

You can use Part 4 of Schedule 500, Ontario Corporation Tax Calculation, to calculate the Ontario credit union tax reduction. Schedule 500 is a worksheet and you do not have to file it with your return.

To claim the Ontario credit union tax reduction, file Schedule 17, Credit Union Deductions, with your return.

On line 410 of Schedule 5, enter the amount of the reduction you are claiming.

Reference
Section 35, Taxation Act, 2007 (Ontario)

Ontario research and development tax credit

You can claim this credit if you have a permanent establishment in Ontario and you had eligible expenditures for scientific research and experimental development carried out in Ontario.

An eligible expenditure is all of the following:

• an expenditure attributable to a permanent establishment in Ontario of a corporation

• a qualified expenditure for the purposes of section 127 of the federal Income Tax Act for scientific research and experimental development carried on in Ontario

• reduced by government assistance, non-government assistance, or contract payments received, entitled to be received, or reasonably expected to be received

The amount of the non-refundable credit is equal to 3.5% of eligible expenditures incurred by a corporation in a tax year that ends on or after June 1, 2016. The rate was previously 4.5%.

If the credit rate changes during the tax year, you have to base your calculation on the number of days in the year that each rate is in effect.

The credit may be applied to reduce Ontario corporate income tax that you would otherwise have to pay. An unused credit can be carried back 3 years and can be carried forward 20 years.

Only corporations that are not exempt from Ontario corporate income tax and that have no exempt income can claim the credit.

You can waive the current-year research and development tax credit, in whole or in part, under subsection 43(1) of the Taxation Act, 2007 (Ontario).

To claim the credit, file a completed Schedule 508, Ontario Research and Development Tax Credit, with your return. Also attach completed copies of Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim, and Schedule 31, Investment Tax Credit - Corporations.

If the corporation is a member of a partnership and is allocated a portion of the credit as provided for in section 40 of the Taxation Act, 2007 (Ontario), attach a schedule showing the partnership's calculation.

On line 416 of Schedule 5, enter the amount of the credit you are claiming.

References
Sections 38 to 44, Taxation Act, 2007 (Ontario)

Recapture of Ontario research and development tax credit

A corporation that disposed of a property used in scientific research and experimental development, or converted it to commercial use, may have to report a recapture of any Ontario research and development tax credit previously calculated on that property. Any recapture will create or increase Ontario tax otherwise payable.

To calculate the recapture, complete Schedule 508, Ontario Research and Development Tax Credit.

On line 277 of Schedule 5, enter the amount of recapture calculated.

Reference
Section 45, Taxation Act, 2007 (Ontario)

Ontario corporate minimum tax credit

The Ontario corporate minimum tax credit that may be deducted from Ontario corporate income tax payable for the tax year is equal to the least of:

• the corporate minimum tax credit available for the tax year

• the Ontario corporate income tax payable (before the corporate minimum tax credit) minus the greater of the following two amounts:

  • the corporate minimum tax after foreign tax credit deduction

  • the gross special additional tax on life insurance corporations for the tax year

• the Ontario corporate income tax payable (before the corporate minimum tax credit) minus the total refundable tax credits for the tax year

The minimum tax credit carryforward at the beginning of the tax year is equal to the minimum tax and special additional tax paid in previous tax years less any minimum tax credit previously deducted or expired. Only special additional tax paid in a tax year ending after 2008 is included.

The minimum tax credits attributable to tax years ending after March 22, 2007, can be carried forward for 20 years.

For tax years ending after 2008, the carryforward of minimum tax credits attributable to tax years ending before March 23, 2007, is extended from 10 to 20 years if the credit did not otherwise expire before the beginning of the corporation's first tax year ending after 2008.

Complete Parts 4, 5, and 6 of Schedule 510, Ontario Corporate Minimum Tax, to calculate the corporate minimum tax credit carryforward and the credit deducted in the current tax year.

On line 418 of Schedule 5, enter the amount of the credit deducted in the current tax year.

References
Subsections 53(1) to 53(5), Taxation Act, 2007 (Ontario)

Ontario community food program donation tax credit for farmers

A non-refundable tax credit is available for farmers who donate to community food programs.

A qualifying donation is a donation of one or more agricultural products produced in Ontario by an eligible person and given by an eligible person to an eligible community food program in Ontario.

The credit is equal to 25% of that part of the corporation's qualifying donations for the year that the corporation deducted under subsection 110.1(1) of the federal Income Tax Act when computing its taxable income for the year.

You must claim the credit in the same year that you claim the deduction for charitable gifts under section 110.1 of the federal Income Tax Act for the donation. Charitable gifts are eligible for a five-year carryforward.

To claim the credit, file a completed Schedule 2, Charitable Donations and Gifts, with your return. For more details, see the schedule.

On line 420 of Schedule 5, enter the amount of the credit you are claiming.

Reference
Section 103.1.2, Taxation Act, 2007 (Ontario)

Ontario qualifying environmental trust tax credit

A corporation that is the beneficiary of a qualifying environmental trust located in Ontario can claim a qualifying environmental trust tax credit on income that is subject to tax under Part XII.4 of the federal Income Tax Act.

The amount of the tax credit is the corporation's share of the qualifying environmental trust tax paid by the trust.

The qualifying environmental trust will issue a letter to the corporation that is a beneficiary.

The credit is fully refundable but must first be applied against taxes payable.

You do not have to file the letter with your return. However, keep it in case the CRA asks for it later.

On line 450 of Schedule 5, enter the amount of the credit you are claiming.

Reference
Section 87, Taxation Act, 2007 (Ontario)

Ontario co-operative education tax credit

You can claim this refundable credit if you are a corporation that provided a qualifying work placement at a permanent establishment in Ontario for a student enrolled in a qualifying post-secondary co-operative education program.

To be a qualifying work placement, the work placement must meet all of the following conditions:

• the student must perform employment duties for a corporation under a qualifying co-operative education program

• the placement must be developed or approved by an eligible educational institution as a suitable learning situation

• the terms of the placement must require the student to engage in productive work

• the placement must be for a period of at least 10 consecutive weeks except, in the case of an internship program, the placement cannot be less than 8 consecutive months and not more than 16 consecutive months

• the corporation must supervise and evaluate the job performance of the student

• the institution must monitor the student's performance in the placement

• the institution must certify the placement as a qualifying work placement

• the student must be paid for the work performed

The credit is equal to an eligible percentage (25% to 30%) of the eligible expenditures incurred by the corporation for a qualifying work placement.

The maximum credit for each qualifying work placement is $3,000.

Eligible expenditures are equal to the following amounts:

• salaries and wages (including taxable benefits) paid or payable to a student in a qualifying work placement

• fees paid or payable to an employment agency for the provision of services performed by the student in a qualifying work placement

Keep a copy of the letter of certification from the eligible educational institution in Ontario to support your claim. The letter of certification must contain the name of the student, the employer, and the educational institution, as well as the term of the work placement and the name or discipline of the qualifying co-operative education program.

To claim the credit, file a completed Schedule 550, Ontario Co-operative Education Tax Credit, with your return. For more details, see the schedule.

On line 452 of Schedule 5, enter the amount of the credit you are claiming.

Reference
Section 88, Taxation Act, 2007 (Ontario)

Ontario computer animation and special effects tax credit

The Ontario computer animation and special effects (OCASE) tax credit is a refundable tax credit equal to 18% of the qualifying labour expenditures for eligible computer animation and special effects activities, incurred by a qualifying corporation for an eligible production.

Qualifying labour expenditures equal the corporation's Ontario labour expenditures less any assistance reasonably related to these expenditures, other than excluded government assistance. For productions for which the qualifying corporation incurred any specified labour costs before March 26, 2024, qualifying labour expenditures must be incurred in the tax year.

The Ontario labour expenditures are the sum of the salaries and wages and the remuneration incurred that are directly attributable to computer animation and special effects activities performed in Ontario and paid to certain persons or entities, within 60 days of the end of the tax year.

To be eligible for the credit, a corporation must meet certain criteria, including all of the following:

• be a Canadian corporation

• perform eligible computer animation and special effects activities for the eligible production at a permanent establishment in Ontario for the tax year

  Note
  Eligible labour expenditures may include remote work done by employees, if the work is done in Ontario and the employee is an Ontario resident who reports to and is under the direction of an eligible tax credit applicant with a permanent establishment in Ontario.

• not be exempt from tax under Part III of the Taxation Act, 2007 (Ontario) for the tax year

• not be controlled directly or indirectly, at any time in the tax year, in any way, by one or more corporations, all or part of whose taxable income is exempt from tax under section 57 of the Corporations Tax Act (Ontario) or Part III of the Taxation Act, 2007 (Ontario)

• not be a prescribed labour-sponsored venture capital corporation at any time in the tax year

For productions for which the qualifying corporation incurred any specified labour costs before March 26,2024, a certificate for the Ontario production services tax credit or the Ontario film and television tax credit must have been issued to a qualifying corporation in respect of the production.

Before claiming the credit, you must apply online to Ontario Creates for a certificate of eligibility. If the production is eligible, Ontario Creates will issue a certificate indicating the estimated amount of the tax credit. Only one certificate of eligibility is issued for all of the eligible productions for the tax year.

To claim the credit, file the following with your return for the year:

• a certificate of eligibility (or copy) issued by Ontario Creates

• a completed Schedule 554, Ontario Computer Animation and Special Effects Tax Credit, for each eligible production

If you file your return electronically, see information on T2 Attach-a-doc on page 12.

If you file a paper return, send the return and required attachments to your tax centre. To find your tax centre, go to canada.ca/cra-tso-contact-information.

On line 456 of Schedule 5, enter the total amount of the credit you are claiming.

Reference
Section 90, Taxation Act, 2007 (Ontario)

Ontario film and television tax credit

The Ontario film and television tax credit is a refundable tax credit based on the qualifying labour expenditures incurred by a qualifying production company for eligible Ontario productions. The amount of credit depends on whether the eligible production is:

• a first-time production

• a small first-time production

• other than a first-time production

First-time production

If the eligible Ontario production is a first-time production, you can claim a credit equal to:

• 40% of the labour expenditures, for the first $240,000 for the production and 35% on the balance

• an additional 10% of the labour expenditures if the production is a regional Ontario production

Small first-time production

If the eligible Ontario production is a small first-time production, you can claim a credit equal to the lesser of:

• the labour expenditures

• $20,000 if the production is a regional Ontario production or $15,000 if it is not a regional Ontario production. These amounts are reduced by any Ontario film and television tax credits previously received for the production

The total labour expenditure for a small first-time production cannot be more than $50,000 at the time the production is completed.

Other than a first-time production

If the eligible Ontario production is other than a first-time production, you can claim a credit equal to:

• 35% of labour expenditures

• an additional 10% of labour expenditures if the production is a regional Ontario production

The qualifying labour expenditures equal the corporation's Ontario labour expenditures less assistance reasonably related to these expenditures. Some exceptions apply, see Schedule 556.

The qualifying labour expenditures are determined without reference to any equity investment held by a person prescribed under section 1106(10) of the federal regulations.

The Ontario labour expenditures are the sum of the salaries, wages, and remuneration paid, and reimbursements made to the parent company of eligible salaries and wages and remuneration, incurred in a tax year that are directly attributable to the eligible Ontario production, performed in Ontario and paid to certain persons or entities, within 60 days of the end of the tax year.

To be eligible for the credit, a corporation must meet certain criteria, including all of the following:

• be a Canadian-controlled corporation throughout the tax year as determined under sections 26 to 28 of the Investment Canada Act

• have a permanent establishment in Ontario throughout the tax year

• be primarily engaged in the carrying on of a Canadian film or video production business through a permanent establishment in Canada in the tax year

• not be exempt from tax under Part III of the Taxation Act, 2007 (Ontario) or Part I of the federal Income Tax Act for the tax year

• not be controlled, at any time in the tax year, directly or indirectly, in any way, by one or more persons, all or part of whose taxable income was exempt from tax under Part I of the federal Income Tax Act

• not be a prescribed labour-sponsored venture capital corporation at any time in the tax year

You cannot claim the Ontario film and television tax credit if you claim the Ontario production services tax credit for that same production for any tax year.

All productions must provide on-screen acknowledgement of Ontario's support in their end credits if principal photography started after August 24, 2023.

Before claiming the credit, you must apply online to Ontario Creates for a certificate of eligibility. If the production is eligible, Ontario Creates will issue a certificate indicating the estimated amount of the tax credit.

To claim the credit, file the following with your return for the year for each eligible production:

• a certificate of eligibility (or copy) or the Letter of Confirmation issued by Ontario Creates

• a completed Schedule 556, Ontario Film and Television Tax Credit

If you file your return electronically, see information on T2 Attach-a-doc on page 12.

If you file a paper return, send the return and required attachments to your tax centre. To find your tax centre, go to canada.ca/cra-tso-contact-information.

On line 458 of Schedule 5, enter the total amount of the credit you are claiming.

Reference
Section 91, Taxation Act, 2007 (Ontario)

Ontario production services tax credit

The Ontario production services tax credit is a refundable tax credit based on qualifying production expenditures incurred for eligible film or television productions by a qualifying corporation in a tax year. The corporation can be Canadian or foreign owned.

The credit is equal to 21.5% of qualifying production expenditures incurred, including qualifying labour expenditures as well as the purchase or rental of qualifying tangible properties, such as equipment and studio rentals.

The qualifying production expenditures include the sum of:

• eligible wage expenditures

• eligible service contract expenditures

• eligible tangible property expenditures

• reimbursements to the parent company of eligible wage and service contract expenditures

less

• assistance reasonably related to these expenditures (some exceptions apply- see next and Schedule 558)

Effective November 15, 2022, expenditures for leasing real property in Ontario for on-location filming no longer must meet the "ordinarily engaged in" requirement for eligible tangible property expenditures. Expenditures must be reasonable in the circumstances and paid to an arm's length party. The maximum eligible expenditures for leasing real property for on-location filming is 5% of the production's qualifying production expenditures, net of these location costs.

The eligible expenditures incurred in the tax year must be reasonable and directly attributable to the eligible production, performed in Ontario and paid to certain persons or entities, within 60 days of the end of the tax year.

Ontario labour expenditures (including labour under a service contract) must amount to at least 25% of the total qualifying production expenditures. Otherwise, the corporation's qualifying production expenditure limit for a tax year cannot be more than four times the Ontario labour expenditures (including labour under a service contract).

Retroactive to June 4, 2015, eligible service contract expenditures included in determining a corporation's expenditure limit must relate to remuneration paid by the corporation, rather than to salary and wages paid to Ontario-based individuals.

Expenditures incurred through non-arm's length contracts are limited to expenditures that would have been eligible if incurred directly by the corporation. Only expenditures incurred after the final script stage to the end of the post-production stage are eligible for the credit.

To be eligible for the credit, a corporation must meet certain criteria, including all of the following:

• be primarily engaged, in the tax year, in the carrying on of a film or video production business, or a film or video production services business, through a permanent establishment in Ontario

• not be exempt from tax, for the tax year, under Part III of the Taxation Act, 2007 (Ontario) or Part I of the Income Tax Act

• not, at any time in the tax year, be controlled directly or indirectly, in any way, by one or more persons, all or part of whose taxable income was exempt from tax under Part I of the Income Tax Act

• not be a prescribed labour-sponsored venture capital corporation at any time in the tax year

You cannot claim the Ontario production services tax credit if you claim the Ontario film and television tax credit for that same production for any tax year.

All productions must provide on-screen acknowledgement of Ontario's support in their end credits if principal photography started after August 24, 2023.

Before claiming the credit, you must apply online to Ontario Creates for a certificate of eligibility. If the production is eligible, Ontario Creates will issue a certificate indicating the estimated amount of the tax credit.

To claim the credit, file the following with your return for the year for each eligible production:

• a certificate of eligibility (or copy) issued by Ontario Creates

• a completed Schedule 558, Ontario Production Services Tax Credit

If you file your return electronically, see information on T2 Attach-a-doc on page 12.

If you file a paper return, send the return and required attachments to your tax centre. To find your tax centre, go to canada.ca/cra-tso-contact-information.

On line 460 of Schedule 5, enter the total amount of the credit you are claiming.

Reference
Section 92, Taxation Act, 2007 (Ontario)

Ontario interactive digital media tax credit

The Ontario interactive digital media tax credit is a refundable tax credit based on qualifying expenditures incurred for eligible products and eligible digital games by a qualifying corporation during a tax year.

This credit focuses on entertainment products and educational products for children under 12. Certain products, such as search engines, real estate databases, or news and public affairs products are excluded. These do not apply to large digital game corporations (qualifying digital game corporations and specialized digital game corporations).

Film and television websites that are bought or licensed by a broadcaster and embedded in the broadcaster's website are eligible for the Ontario interactive digital media tax credit. This applies to websites that host content related to film, television, or Internet productions that, as of November 1, 2017, had not received a certificate of eligibility or a letter of ineligibility.

The following conditions apply:

• 80% of total labour costs for eligible products have to be attributable to qualifying wages and qualifying remuneration paid to individuals or to corporations that carry on a personal services business

• 25% of total labour costs for eligible products have to be attributable to qualifying wages of employees of the qualifying corporation

The above-noted eligibility requirements do not apply to large digital game corporations.

The credit applies to the following situations:

• all qualifying corporations that develop and market their own eligible products (non-specified products) are eligible to claim a credit equal to 40% of expenditures. These expenditures include marketing and distribution expenditures paid within 60 days of the end of the tax year, for a maximum of $100,000 per eligible product for all tax years

• qualifying corporations that develop eligible products under a fee-for-service arrangement (specified products) are eligible to claim a credit equal to 35% of expenditures

• a 35% credit is available to both:

  • qualifying digital game corporations that incur a minimum of $1 million of eligible Ontario labour expenditures over a 36-month period for fee-for-service work done in Ontario for an eligible digital game

  • specialized digital game corporations that incur at least $500,000 ($1 million for tax years starting before April 12, 2019) of Ontario labour expenses each year in developing eligible digital games. A specialized digital game corporation generally would have at least 80% of Ontario payroll or 90% of annual gross revenues directly attributable to developing digital games

For all eligible products, qualifying expenditures include Ontario salaries and wages incurred in a tax year that are directly attributable to the eligible product and paid within 60 days of the end of the tax year.

Eligible expenditures include remuneration paid to individuals, other taxable Canadian corporations, and partnerships. If amounts are paid to individuals, other taxable Canadian corporations or partnerships for services rendered by its employees, the expenditures must not be more than the salaries and wages of those employees. Corporations that develop specified products may also claim these expenditures.

Qualifying expenditures are reduced by any government assistance reasonably related to these expenditures (some exceptions apply- see Schedule 560).

You cannot claim the Ontario interactive digital media tax credit if you claim the Ontario computer animation and special effects tax credit, the Ontario film and television tax credit or the Ontario production services tax credit for the same expenditure for any tax year.

To be eligible for the credit, a corporation must meet certain criteria, including all of the following:

• be a Canadian corporation

• have completed development on or developed an eligible interactive digital media product at a permanent establishment in Ontario, as described in subsection 93(16) of the Taxation Act, 2007 (Ontario)

  Note
  Eligible labour expenditures may include remote work done by employees, if the work is done in Ontario and the employee is an Ontario resident who reports to and is under the direction of an eligible tax credit applicant with a permanent establishment in Ontario.

• not be exempt from tax under Part III of the Taxation Act, 2007 (Ontario) for the tax year

• not be controlled directly or indirectly, in any way, at any time in the tax year, by one or more corporations, all or part of whose taxable income was exempt from tax under section 57 of the Corporations Tax Act (Ontario) or Part III of the Taxation Act, 2007 (Ontario)

• not be a prescribed labour-sponsored venture capital corporation at any time in the tax year

In addition, a large digital game corporation must also meet the following criteria:

• be a corporation that carries on through a permanent establishment in Ontario a business that includes developing digital games

• not be a corporation the primary activity of which is to provide the services of a single individual and all the issued and outstanding shares of the capital stock of which are owned by that individual

For more information see Schedule 560, Ontario Interactive Digital Media Tax Credit.

Before claiming the credit, you must apply online to Ontario Creates for a certificate of eligibility. If the product or digital game is eligible, Ontario Creates will issue a certificate indicating the estimated amount of the tax credit. Only one certificate of eligibility is issued for all of the eligible products or digital games for the tax year.

To claim the credit, file the following with your return for the year:

• a certificate of eligibility (or copy) issued by Ontario Creates

• a completed Schedule 560, Ontario Interactive Digital Media Tax Credit, for each eligible product or eligible digital game

If you file your return electronically, see information on T2 Attach-a-doc on page 12.

If you file a paper return, send the return and required attachments to your tax centre. To find your tax centre, go to canada.ca/cra-tso-contact-information.

On line 462 of Schedule 5, enter the total amount of the credit you are claiming.

Reference
Section 93, Taxation Act, 2007 (Ontario)

Ontario book publishing tax credit

The Ontario book publishing tax credit is a refundable tax credit of 30% on the qualifying expenditures incurred during a tax year for an eligible literary work, by an Ontario book publishing company, up to a maximum credit of $30,000 per work.

Qualifying expenditures include the following expenditures the corporation incurred in publishing an eligible literary work:

• pre-production costs

• marketing expenditures incurred 12 months before to 12 months after the date the literary work is published

• 50% of the production costs

• 100% of expenditures incurred that reasonably relate to preparing a literary work for publishing in one or more digital or electronic formats

• 50% of expenditures incurred that reasonably relate to transferring a prepared digital or electronic version of the literary work into or onto a form suitable for distribution

The credit is available for any number of literary works by a Canadian author in an eligible category.

Qualifying expenditures are reduced by any assistance reasonably related to these expenditures.

To be eligible for the credit, a corporation must meet certain criteria, including all of the following:

• be a Canadian-controlled corporation throughout the tax year, as determined under sections 26 to 28 of the Investment Canada Act

• carry on a book publishing business primarily through a permanent establishment in Ontario for the tax year

• not be exempt from tax under Part III of the Taxation Act, 2007 (Ontario) for the tax year

• not be controlled by the author of the literary work, or by a person not dealing at arm's length with the author

Before claiming the credit, you must apply online to Ontario Creates for a certificate of eligibility. If the literary work is eligible, Ontario Creates will issue the certificate.

To claim the credit, file the following with your return for the year for each literary work:

• a certificate of eligibility (or copy) issued by Ontario Creates

• a completed Schedule 564, Ontario Book Publishing Tax Credit

If you file your return electronically, see information on T2 Attach-a-doc on page 12.

If you file a paper return, send the return and required attachments to your tax centre. To find your tax centre, go to canada.ca/cra-tso-contact-information.

On line 466 of Schedule 5, enter the total amount of the credit you are claiming.

Reference
Section 95, Taxation Act, 2007 (Ontario)

Ontario innovation tax credit

You are eligible to claim an Ontario innovation tax credit if you meet all of the following conditions:

• you had a permanent establishment in Ontario during the year

• you have carried on scientific research and experimental development (SR&ED) in Ontario during the year

• you are not exempt from tax under Part III of the Taxation Act, 2007 (Ontario)

• you are eligible to claim a federal investment tax credit under section 127 of the federal Income Tax Act for the corporation's qualified expenditures

• you have filed Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim, and Schedule 31, Investment Tax Credit - Corporations, in the tax year

The credit is an 8% refundable tax credit based on the sum of the corporation's qualified expenditures incurred in Ontario and any eligible repayments. Qualified expenditures include 100% of current expenditures.

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 and becomes nil at $800,000. 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.

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

You can waive the current year tax credit, in whole or in part, under subsection 96(14) of the Taxation Act, 2007 (Ontario).

File a completed Schedule 566, Ontario Innovation Tax Credit, with your return. See the schedule for more details.

On line 468 of Schedule 5, enter the amount of the credit you are claiming.

Reference
Section 96, Taxation Act, 2007 (Ontario)

Ontario business-research institute tax credit

You are eligible to claim an Ontario business-research institute tax credit if you meet all of the following conditions:

• you carried on business in the tax year through a permanent establishment in Ontario

• you incurred qualified expenditures under an eligible contract with an eligible research institute

• you were not exempt from tax under Part III of the Taxation Act, 2007 (Ontario)

This credit is a 20% refundable tax credit based on qualified expenditures for the tax year incurred in Ontario under an eligible contract with an eligible research institute.

The annual qualified expenditure limit is $20 million. If a corporation is associated with other corporations at any time in a calendar year, the $20 million limit must be allocated among the associated corporations. The maximum tax credit that a qualifying corporation or an associated group of corporations can claim in a tax year is $4 million (20% of $20 million).

Complete Schedule 568, Ontario Business-Research Institute Tax Credit, to claim the credit and complete a Schedule 569, Ontario Business-Research Institute Tax Credit Contract Information, for each eligible contract.

Keep a copy of each eligible contract to support your claim.

On line 470 of Schedule 5, enter the amount of the credit you are claiming.

Reference
Section 97, Taxation Act, 2007 (Ontario)

Ontario regional opportunities investment tax credit

A 10% refundable income tax credit applies to capital investments. A Canadian-controlled private corporation that invests in capital property that becomes available for use on or after March 25, 2020, in designated regions of Ontario, may be eligible for the tax credit. For a listing of designated regions, see ontario.ca/page/regional-opportunities-investment-tax-credit#section-4.

Eligible property is capital property included in capital cost allowance class 1 or class 6, with some exceptions. Expenditures for these classes include costs for constructing, renovating, or acquiring eligible commercial and industrial buildings.

If the property is a building, or an addition or alteration to a building, at least 90% of the floor space of the building is used at the end of the tax year for a non-residential use.

The tax credit is available for expenditures of more than $50,000 and up to a limit of $500,000 in the tax year. In general, the qualifying region includes the north, the east (except the Ottawa region) and the south-west of Ontario.

A qualifying corporation that is associated with one or more other corporations during a particular tax year may claim this credit if each of the other corporations has agreed in writing to waive, under subsection 97.1(7) of the Taxation Act, 2007 (Ontario), its right to claim this credit for any tax year of the other corporation that overlaps with the particular tax year.

To claim the credit, file a completed Schedule 570, Ontario Regional Opportunities Investment Tax Credit, with your return. By filing this schedule, you confirm that you have obtained waivers from all associated corporations. Do not file the waivers with the schedule, but keep them in case the CRA asks for them later. For more details, see the schedule.

On line 472 of Schedule 5, enter the amount of the credit you are claiming.

Reference
Section 97.1, Taxation Act, 2007 (Ontario)

Ontario made manufacturing investment tax credit

A new 10% refundable corporation income tax credit has been introduced for qualifying investments made after March 22, 2023, of up to $20 million in a tax year made by eligible corporations, for a maximum credit of $2 million a tax year. Eligible corporations are Canadian-controlled private corporations that have a permanent establishment in Ontario. The $20 million limit can be shared by an associated group of corporations and is prorated for short tax years.

Qualifying investments are capital expenditures for the construction, renovation, or acquisition of buildings included in capital cost allowance class 1 that become available for use after March 22, 2023, and expenditures for machinery and equipment included in class 53 that are acquired and become available for use after March 22, 2023, and before 2026. The buildings and machinery and equipment must be used for the manufacturing or processing of goods in Ontario.

After 2025, qualifying investments in machinery and equipment will be capital expenditures for assets included in paragraph (a) of class 43 that are used in the manufacturing or processing of goods for sale or lease.

To claim the credit, file a completed Schedule 572, Ontario Made Manufacturing Investment Tax Credit, with your return.

For more details, see the schedule.

On line 474 of Schedule 5, enter the amount of the credit you are claiming.

Reference
Section 97.2, Taxation Act, 2007 (Ontario)

Ontario specialty types

Any corporation carrying on business in Ontario through a permanent establishment must file Schedule 524, Ontario Specialty Types, to identify its specialty type in one of the following situations:

• the tax year is the first year after incorporation or an amalgamation

• there is a change to the specialty type

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