New Investment Tax Credit Coming to Ontario for Manufacturers
New Investment Tax Credit for Ontario Manufacturers
On March 22, 2023, CBC News published an article, “Ontario to introduce new 10% income tax credit for manufacturing sector“, informing taxpayers of a new investment tax credit(ITC) that the Ontario government will be introducing for the manufacturing sector in the near future. Upon further investigation, we located a news release published on March 22, 2023, by the government of Ontario in which they announce plans for this new Ontario Made Manufacturing Investment Tax Credit to “help local manufacturers grow, innovate, become more competitive and create jobs.”1 The Press Release states:
As part of the upcoming 2023 Budget, the government will propose legislation that would, if passed, create a new 10 percent refundable corporate income tax credit of up to $2 million a year for Canadian-controlled private corporations on qualifying investments in buildings, machinery and equipment for use in manufacturing or processing in the province.2
The Ontario government hopes to attract additional investment in the province’s economy by implementing this new ITC:
“This new tax credit will give Ontario-based manufacturers another reason to invest in home grown, Ontario-made innovation and expand operations,” said Premier Doug Ford. “As we navigate global economic uncertainty, our government is working around the clock to ensure that we are creating the right conditions for Ontario’s world-class manufacturing sector to grow and create more jobs.”
The proposed Ontario Made Manufacturing Investment Tax Credit would, if passed, provide an estimated $780 million over the next three years in Ontario income tax support to qualifying businesses. Savings from the new tax credit is just one of the many initiatives the government has taken since 2018 to improve Ontario’s competitiveness by lowering costs for business.
“Our government is continuing to bring back the province’s manufacturing sector by attracting key investments and creating and protecting jobs in communities across the province,” said Peter Bethlenfalvy, Minister of Finance. “The new Ontario Made Manufacturing Investment Tax Credit is just one part of our plan to build a strong economy for the future, today.”3
The press release lists the following factors which are prompting the Ontario government to put this new ITC into action:
Quick Facts
- Ontario’s manufacturing sector is a key contributor to the economic success of the province. However, by 2018 employment in Ontario’s manufacturing sector declined by over 300,000 workers from 2004. Over this period, the competitiveness of the sector was negatively impacted by the high cost of doing business, gaps in skills training programs, and a lack of business investment.
- The proposed new Ontario Made Manufacturing Investment Tax Credit would be available to Canadian-controlled private corporations that make qualifying investments and that have a permanent establishment in Ontario (meaning a fixed place of business including an office, a factory or a workshop).
- If passed, the tax credit would be available for qualifying investments up to a limit of $20 million in a taxation year and the limit would be prorated for a short taxation year.
- Qualifying investments would be expenditures for certain capital property included in Class 1 or Class 53 for capital cost allowance purposes.
- The actions Ontario has taken to save costs for businesses would enable an estimated $8 billion in cost savings and support for some Ontario employers in 2023, with $3.6 billion to go to small businesses.4
This new ITC could be of great assistance to companies within the manufacturing industry. The additional income could reduce the financial strain which can be acquired during the scientific research and experimental development (SR&ED) process. This new ITC may subsequently promote innovation within manufacturing. We will keep an eye on the status of this new ITC and keep our readers up to date on any new developments. For details on how your manufacturing work may be eligible for SR&ED see our article Little Known Sectors that Qualify for SR&ED Part Three: Manufacturing.