Ontario Budget 2016: The Government Announces Reduction in R&D Tax Credits
In its budget announcement released on Thursday, February 25th, the government of Ontario proposed to reduce the level of financial support provided through two of the R&D tax credits offered by the province, which are separate from the federal SR&ED tax credits.
The changes include:
- A 1% reduction to the Ontario Research and Development Tax Credit (ORDTC), from 4.5% down to 3.5%, This credit is non-refundable.
- A 2% reduction to the Ontario Innovation Tax Credit (OITC), from 10% down to 8%. This credit is refundable. The changes will be in effect for eligible R&D expenditures incurred during taxation years that end on or after June 1, 2016. The rate reductions would be prorated for taxation years straddling June 1, 2016. The savings from these measures will be re-directed towards the Advancement Manufacturing Consortium ($35M over 5 years), and the Perimeter Institute Research Center ($50M over 5 years), along with partnerships with colleges.
- The Ontario Business Research Institute Tax Credit (OBRITC) offering a 20% refundable tax credit on eligible R&D expenditures incurred under contract with eligible research institutes, is retained.
All major direct funding initiatives are also retained, including:
- Job and prosperity funds
- Eastern Ontario Development Fund (EODF)
- Southwestern Ontario Development Fund (SWODF)
- Northern Ontario Heritage Fund Corporation (NOHFC)
- Rural Economic Development (RED) program
- Aboriginal Economic Development Fund (AEDF)
- Ontario Youth Job Strategy and Job Grants programs
When conducting R&D and business development projects, it is important to plan ahead and consider a combination of both direct and indirect government funding options. If you have any questions regarding R&D tax credits, or are engaging in business or capital expansion projects, please contact us for more information on available government funding related to your projects and industry.