Discover tax credits that are available for small businesses and corporations in Ontario. Review credits to offset costs of training workers, producing books, films and more.
To foster a productive environment for businesses, the Ontario government offers a number of provincial tax credits. Applicable to a variety of industries, these credits help offset multiple costs and are designed to help businesses succeed.
Training Tax Credits
Ontario offers two training tax credits: the apprenticeship credit and the co-operative education credit. For both credits, corporations may claim 25% of eligible expenses, and small businesses may claim 30%.
The apprenticeship credit is worth up to $15,000. It includes expenses incurred during a 36-month apprenticeship program in manufacturing, plumbing, or more than 100 other trades.
The co-operative learning credit, which is worth up to $3,000 per placement, is designed for businesses that create 10-week to 4-month educational work opportunities for high school or college students.
Creative and Cultural Credits
Credits that encourage creative and entertainment companies to do business in Ontario include:
- Book Publishing Credit: Worth 30% of expenditures related to publishing books, this credit provides up to $30,000 per title.
- Computer and Animation Tax Credit: If you make computer animation or special effects, you can qualify for an 18% tax credit for eligible labour expenses, including paying employees and hiring freelancers.
- Ontario Film and Television Tax Credit: With this credit, you can claim 40% of labour expenses up to $240,000 and 35% of expenses over that amount, plus a 10% bonus credit if you shoot outside the Toronto Greater Area.
- Ontario Production Services Tax Credit: Production companies can claim up to 21.5% of eligible expenditures, but at least a quarter of the claimed expenses must be related to labour in Ontario.
- Ontario Interactive Digital Media Tax Credit: Interactive digital media companies can claim a 35% credit on eligible labour costs with no cap. They can also claim expenses, which are capped at $100,000 per non-specified product.
Ontario Business Research Institute Tax Credit
Research hospitals and nonprofits designated as research hospitals can claim this refundable credit. Worth up to $20 million, the credit is 20% of eligible expenses for scientific research and experimental development. If you do the accounting for an Ontario or federal Centre of Excellence, you can also claim this credit for that organization.
Ontario Innovation Tax Credit
Corporations that perform scientific research and experimental development may claim the Ontario Innovation Tax Credit worth 8% of qualified expenses. You can only claim this credit if you’re eligible for the federal investment tax credit. The Ontario Research and Development Tax Credit is very similar, but it’s only worth 3.5% of eligible expenditures.
Community Food Program Donation Tax Credit
If you’re a farmer or part of a farming co-op, you may be able to claim this special credit. The credit is for agricultural donations to eligible community programs such as food banks. In addition to claiming a charitable deduction worth the fair market value of the donation, you get to claim an extra 25% credit.
For example, if you donate $10,000 worth of food, you can claim a charitable giving deduction that pretty much eliminates the income tax on $10,000 of earnings, and you can also claim a tax credit of $2,500. As a business owner, you should claim all the credits available to you to save money on your tax return. Luckily, you can claim many credits retroactively if you miss them initially.
Don’t Miss Small Business Tax Credits
Small businesses leave money on the table each tax year by overpaying their taxes. This often occurs because small business owners overlook deductions and tax credits that are available to them.
For example, when your Ontario-based small business spends money on activities that involve computer animation and special effects, you may be able to claim as much as 20% of your expenses through the Ontario computer animation and special effects tax credit. If you own a book publishing business in Ontario, you may be eligible for the Ontario book publishing tax credit. In addition, the Ontario apprenticeship training tax credit offers small businesses a tax credit when they provide apprenticeship to students.
The Canada Revenue Agency website offers a comprehensive list of available small business tax credits for each province. Visit the CRA website to research what other tax credits your business may be eligible to receive.
Don’t Forget About Ontario’s Refundable Media Tax Credit
If your business develops interactive digital media products in Ontario, you may qualify for a refundable tax credit. The Ontario Interactive Digital Media Tax Credit is worth 35 or 40% of eligible labour, marketing, and distribution expenses.
If your company develops and markets its own products, it generally receives a 40% credit. Digital game corporations and companies that develop products under a fee-to-service arrangement receive the 35% credit. In general, companies that develop digital games, mobile apps, and e-learning products for children typically qualify for this credit. Companies that make operating software usually don’t qualify.
To understand how the credit works, consider this example:
- Your company has $1 million in eligible expenses and falls into the 40% category.
- You receive a refundable tax credit of $400,000, meaning it can cover your tax bill and possibly result in a refund.
- If your business owes $350,000 in tax, it receives a $50,000 refund.
To apply for this credit,:
- Your company must obtain an eligibility certificate from the Ontario Media Development Corporation.
- Your company must send the certificate to the Film Services Unit that covers your area.
- Your company must Pay the application fee, which, as of 2018, is 0.15% of your eligible expenses.
- The minimum fee is $1,000, and the maximum is $10,000.
- Your company should apply within 18 months of the last day of the tax year in which you completed the project.
- If you apply after that deadline, there is an additional $100 fee.
To encourage the production of media in Ontario, the CRA offers a special tax credit. The credit requires a bit of additional paperwork, so you can’t just claim it on your corporate tax return. It’s a generous credit, and if you think you might be eligible, it’s worth checking out.