Ontario Research and Development Tax Credit (ORDTC)

Overview of the Ontario Research and Development Tax Credit (ORDTC) program:

The Ontario Research and Development Tax Credit (ORDTC) is a key initiative by the Government of Ontario designed to encourage innovation and technological advancement by supporting businesses that invest in scientific research and experimental development (SR&ED). This tax credit applies to corporations with permanent establishments in Ontario that incur eligible R&D expenditures within the province. The program allows businesses to claim a percentage of their qualified expenditures as a non-refundable tax credit, effectively reducing their Ontario corporate income tax liability. Eligible activities include systematic investigations or experiments in fields such as engineering, design, computer science, physical and life sciences, or mathematics, undertaken to advance scientific knowledge or achieve technological innovation. These may involve creating or improving materials, products, devices, or processes. Only expenditures related to eligible SR&ED activities performed in Ontario qualify. The credit complements the federal Scientific Research and Experimental Development (SR&ED) Program administered by the Canada Revenue Agency (CRA). Claims must be submitted in conjunction with the federal SR&ED claim using prescribed forms, and the CRA administers the program on behalf of Ontario. While the ORDTC is non-refundable (meaning it can only reduce tax owing, not create a refund), unused credits can be carried back three years or forward up to 20 years to offset future Ontario corporate taxes. This credit helps reduce the financial burden of innovation, giving Ontario companies a competitive edge in advancing research, commercializing ideas, and supporting high-value job creation in the province’s economy.

Benefits of the Ontario Research and Development Tax Credit (ORDTC) program:

• Reduces corporate tax owing for Ontario-based R&D
• Can be carried forward (20 years) or back (3 years) for flexibility in tax planning
• Encourages investment in innovation, product development, and process improvement
• Complements the federal SR&ED tax incentive program
• Supports business competitiveness and technological leadership
• Helps offset costs for wages, materials, overhead, and R&D contracts
• Encourages collaboration between industries and academia or research institutions
• Applicable to a wide range of industries, including biotech, software, manufacturing, and clean technology

Eligibility criteria of the Ontario Research and Development Tax Credit (ORDTC) program:

• Location: Corporations must have a permanent establishment in Ontario
• Business Type: Only corporations (not partnerships or sole proprietors) qualify
• Activity Type: Eligible SR&ED activities must be performed in Ontario and qualify under the federal definition
• Includes basic research, applied research, and experimental development
• Eligible Expenses:
• Wages and salaries of employees conducting eligible R&D
• Materials consumed or transformed in the R&D process
• Contract R&D performed in Ontario (limits apply)
• Overhead and other expenditures directly attributable to R&D
• Expectations: Must maintain detailed project records, time tracking, and support documentation to substantiate claims
• CRA Review: Subject to federal CRA assessment and potential audit