Ontario Innovation Tax Credit

Definition

The Ontario Innovation Tax Credit (OITC) refunds 8% of qualifying Ontario scientific research and experimental development (SR&ED) expenditures, within the corporation's expenditure limit. Eligibility is not restricted to Canadian-controlled private corporations (CCPCs). A corporation must have an Ontario permanent establishment, conduct eligible work in Ontario, meet federal ITC eligibility, file T661 and Schedule 31, and not be exempt from Ontario corporate income tax. Claim OITC on Schedule 566 and transfer it to Schedule 5, line 468. CRA eligibility and claiming instructions.

Limits and assistance

The maximum annual expenditure limit is $3 million, shared by associated corporations. It is reduced using prior-year federal taxable income between $500,000 and $800,000 and specified capital between $25 million and $50 million. Short years and associated groups require the detailed Schedule 566 calculation.

Government and non-government assistance can reduce qualified spending. However, OITC, the Ontario Business-Research Institute Tax Credit, the Ontario Research and Development Tax Credit (ORDTC), and the federal SR&ED ITC do not reduce the OITC base. OITC does reduce the federal SR&ED expenditure pools. CRA provincial SR&ED guidance.

The 3.5% ORDTC is non-refundable. Its base is reduced by assistance including OITC, but not by ORDTC itself or the federal SR&ED ITC. Ontario ORDTC rules.

Federal changes enacted on March 26, 2026 increased the enhanced 35% ITC expenditure limit to $6 million for tax years beginning after December 15, 2024, subject to federal eligibility and phase-outs. Ontario's OITC limit remains $3 million. Federal capital expenditure eligibility was also restored for qualifying expenditures after December 15, 2024; this is not a reason to treat all equipment purchases as eligible Ontario expenditures. The example below covers current expenditures only. Check Ontario's section 96 requirements and current claim instructions separately for capital costs. CRA enacted changes, Ontario OITC guidance.

Worked example

Assume a qualifying CCPC has $500,000 of current expenditures that qualify for all three credits, full expenditure limits, no other assistance or contract payments, and a fully refundable federal 35% ITC. The company can use the entire ORDTC against Ontario tax.

The credits equal 42.293% of the assumed eligible base. Of that total, $195,365 is refundable under these assumptions and $16,100 offsets Ontario tax. This is a credit calculation, not an after-income-tax net benefit: assistance also affects deductions, and unused non-refundable credits do not produce an immediate refund. CRA assistance policy.

Filing and common mistakes

File the T2 and relevant schedules together by the normal corporate return deadline. The underlying federal SR&ED expenditure and ITC reporting deadline is generally 18 months after a corporation's tax year-end. Do not assume late federal SR&ED claims are routinely extendable. CRA's provincial comparison lists no separate OITC claim deadline; the former claim that Ontario has a distinct, unextendable 18-month deadline was incorrect. CRA reporting deadlines.

Avoid claiming costs outside Ontario, subtracting the federal credit from the OITC base, overlooking associated-company limits, or treating the non-refundable ORDTC as cash received.

Related concepts

• Ontario Corporate Tax Rates
• Ontario Made Manufacturing Investment Tax Credit
• CCPC Status