R&D Tax Credits - After tax cost of R&D for small and medium-sized non-manufacturers (public, private or foreign controlled) - Small and Medium-Sized Non-Manufacturers(Public, Private or Foreign-Owned)

R&D Tax Credits

After tax cost of R&D for small and medium-sized non-manufacturers (public, private or foreign-owned)

Federal and provincial incentives on research and development generate significant tax savings, both on a percentage basis and because of the wide range of activities that qualify. The Federal Scientific Research and Experimental Development (SR&ED) tax credit can reduce your R&D cost by 20%.

The 10% refundable Ontario Innovation Tax Credit (OITC) and the 20% refundable Ontario Business-Research Institute Tax Credit (OBRITC) for contract R&D performed at eligible research institutes can stretch your after-tax research dollars much further.

The following charts illustrate the after-tax cost R&D expenditure for a small and medium-sized non-manufacturer in the 2008 and 2009 taxation years. Savings vary by the type of corporation and are affected by changes to tax programs. In Ontario, government incentives can reduce your after-tax cost of $100 in R&D expenditures to approximately $46, and to nearly $35 when under contract with an eligible research institute.

Real After Tax Cost of a $100 R&D Expenditure - 2008 Taxation Year

Real After Tax Cost of a $100 R&D Expenditure - 2008 Taxation Year
Small and Medium-Sized Non-Manufacturers ¹ (Public, Private or Foreign-Owned)	R&D Expenditures	R&D Expenditures at Eligible Ontario Research Institutes ²
Gross expenditure	$100.00	$100.00
Ontario - 10%OITC ³	($10.00)	($10.00)
Ontario - 20% OBRI tax credit ⁴		($20.00)
Federal investment tax credit - 20%	($18.00)	($14.00)
Tax deduction ⁵
$72 x 33.5%	($24.12)
$56 x 33.5%		($18.76)
Ontario exemption of federal investment tax credit
$18 x 14.0%	($2.52)
$14 x 14.0%		($1.96)
After-tax cost of $100 expenditures	$45.36	$35.28

Source: Reviewed by Canada Revenue Agency — Ontario Region; Ministry of Finance, May/June 2008 (9/2008)

NOTES:

¹	Medium-sized companies have taxable income of less than $400,000 and taxable capital of less than $50 million.
²	Eligible Ontario research institutes include universities, colleges of applied arts and technology, research hospitals and other entities in Ontario.
³	The 10% refundable Ontario Innovation Tax Credit (OITC).
⁴	The 20% refundable Ontario Business-Research Institute Tax Credit (OBRITC).
⁵	2008 Tax rates for non-manufacturers: Federal 19.5% plus Ontario 14.0% = Total 33.5%.

Real After Tax Cost of a $100 R&D Expenditure - 2009 Taxation Year

Real After Tax Cost of a $100 R&D Expenditure - 2009 Taxation Year
Small and Medium-Sized Non-Manufacturers ¹ (Public, Private or Foreign-Owned)	R&D Expenditures	R&D Expenditures at Eligible Ontario Research Institutes ²
Gross expenditure	$100.00	$100.00
Ontario - 10%OITC ³	($10.00)	($10.00)
Ontario - 20% OBRI tax credit ⁴		($20.00)
Ontario – 4.5% ORDTC ⁵	($4.05)	($3.15)
Federal investment tax credit - 20%	($17.19)	($13.37)
Tax deduction ⁶
$68.76 x 33.0%	($22.69)
$53.48 x 33.0%		($17.65)
After-tax cost of $100 expenditures	$46.07	$35.83

Source: Reviewed by Canada Revenue Agency — Ontario Region; Ministry of Finance, May/June 2008 (9/2008)

NOTES:

¹	Medium-sized companies have taxable income of less than $400,000 and taxable capital of less than $50 million.
²	Eligible Ontario research institutes include universities, colleges of applied arts and technology, research hospitals and other entities in Ontario.
³	The 10% refundable Ontario Innovation Tax Credit (OITC).
⁴	The 20% refundable Ontario Business-Research Institute Tax Credit (OBRITC).
⁵	The 4.5% Ontario Research and Development Tax Credit.
⁶	2009 tax rates for non-manufacturers: Federal 19.0% plus Ontario 14.0% = Total 33.0%.