If your business in Ontario claims SR&ED, you may also qualify for the Ontario Innovation Tax Credit (OITC). The two programs are connected. You cannot claim OITC unless you first qualify for the federal SR&ED program. When you use them together, they can return a large part of your R&D costs as cash. This is true even if your company owes no provincial tax.
This is important for small and mid-sized corporations doing technical work in Ontario. The OITC adds a refundable provincial credit on top of your federal SR&ED claim, using the same eligible expenses.
The Ontario Innovation Tax Credit is a refundable provincial tax credit worth 8% of eligible SR&ED expenditures made in Ontario.
Here’s how the two programs fit together:
SR&ED is the starting point
To claim OITC, your business must be eligible for the federal SR&ED investment tax credit under section 127 of the Income Tax Act and must file Form T661 for the tax year.
OITC uses the same expenses
Eligible OITC expenditures are the SR&ED costs you report federally, but only those spent in Ontario. This usually includes:
OITC is a separate calculation
After you prepare your federal SR&ED claim, Ontario applies its own rules:
Refundable even with no tax payable
OITC is refundable. You can get the credit as cash, even if your company does not owe Ontario corporate income tax for the year.
GrantHub’s eligibility matcher can help you check if your SR&ED project and company meet Ontario’s extra requirements before you file.
To claim the Ontario Innovation Tax Credit, your corporation must meet all of these conditions:
OITC is meant for small and mid-sized corporations. The credit goes down if:
Remember, these limits apply even if your SR&ED claim is approved.
The claim process is part of your regular tax return:
There is no separate OITC application form. But if there are mistakes or changes to your SR&ED claim, your OITC refund will be reduced or lost.
Thinking OITC is automatic without SR&ED approval
If your SR&ED claim is denied or reduced, your OITC will also be reduced.
Ignoring Ontario income or capital limits
Some companies focus only on technical eligibility and miss the income-based phase-outs.
Claiming expenses outside Ontario
Only SR&ED costs spent in Ontario count for OITC.
Filing late or incomplete T661 forms
Late or missing SR&ED forms can delay or stop your OITC refund.
Q: Can I claim OITC without claiming SR&ED?
No. OITC is only available if you are eligible for and file a federal SR&ED claim.
Q: Is OITC refundable if my business is not profitable?
Yes. OITC is refundable, so you can get cash even if your company owes no Ontario tax.
Q: Does OITC reduce my federal SR&ED credit?
No. OITC does not reduce your federal SR&ED credit, but both credits use the same eligible expenses.
Q: What is the maximum OITC refund I can receive?
For tax years starting after May 31, 2016, the maximum annual OITC refund is $240,000, based on the $3 million expenditure limit.
Q: What happens if CRA reviews my SR&ED claim?
Any CRA changes to your eligible SR&ED costs will also change your OITC calculation.
If you already claim SR&ED, the Ontario Innovation Tax Credit can add a valuable refundable benefit to your tax return. To check your eligibility for OITC and other Canadian R&D programs, use GrantHub’s tools to compare programs and requirements before you file. GrantHub tracks active federal and provincial grants and credits across Canada, helping you find the right options for your business.
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