A new tax benefit allows eligible corporations to receive a 10% refundable income tax credit on qualifying investments up to $20 million per tax year, with a maximum annual credit of $2 million.
This $20 million cap applies collectively to associated corporations and is adjusted for shorter tax years.
For calculating this credit only, any regional opportunities investment tax credit and any amount calculated for this credit, which would otherwise be government assistance for calculating capital cost, is deemed NOT to be government assistance and does not reduce the capital cost.
Eligible corporations:
- are Canadian-controlled private corporations (CCPCs) throughout the year
- are not exempt from tax for the year under the corporate tax provisions of the Ontario Taxation Act (2007)
- carry on business in Ontario in the year through a permanent establishment in Ontario. For this credit, a corporation will have a permanent establishment in a province if it has a fixed place of business of the corporation, including an office, a factory, or a workshop; and where it uses substantial machinery or equipment in a particular place at any time in a tax year
Qualifying investments are expenditures for capital cost allowance (CCA) classes 1 and 53:
- class 1 for constructing, renovating, or acquiring buildings used for manufacturing or processing in Ontario that become available for use after March 22, 2023. To qualify as a building used for manufacturing, 90% of the floor space of the building must be used at the end of the corporation’s tax year for manufacturing or processing in Ontario and it must be eligible for the additional 6% CCA allowed under the federal Income Tax Act
- class 53 machinery and equipment used in the manufacturing or processing of goods in Ontario that are acquired and become available for use after March 22, 2023, and before 2026. After 2025, qualifying investments in machinery and equipment will be expenditures for assets included in class 43(a) (class 43 except powered industrial lift truck and portable tool acquired for the purpose of rental income) that are used in the manufacturing or processing of goods for sale or lease. For information about manufacturing and processing, see Income Tax Folio S4-F15-C1, Manufacturing and Processing
The available-for-use rules differ between buildings and property other than buildings. For information about these rules, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.
You cannot claim a credit for any expenditure that was incurred:
- under a contract with a person or partnership with which the corporation does not deal at arm’s length at the time it was incurred
- by a predecessor corporation that was not a qualifying corporation in case of amalgamation
