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Research & Development Cost Advantage

Tax Credits Significantly Lower R&D Costs

When combined with federal R&D programs, Ontario's Research & Development tax incentive program is one of the most generous in the world. The after-tax cost of $100 in R&D spending can be reduced to between $55 and $37.

Large Manufacturers
July 1, 2015
Public, Private or Foreign-owned
R&D
Expenditures
R&D Expenditures
at Eligible Ontario
Research Institutes1
Gross Expenditure $100.00 $100.00
Ontario - 20% OBRI Tax Credit2   (20.00)
Ontario - 4.5% ORDTC3 (4.50) (3.6)
Federal Investment Tax Credit - 20% (19.10) (15.28)
Tax Deduction4 76.40 x 26.0%, 61.12 x 26.0% (19.86)  (15.89)
After-tax Cost of $100 Expenditure $56.54 $45.23


Notes:
1 Eligible Ontario research institutes include universities, colleges of applied arts and technology, research hospitals and other entities in Ontario.
2 The 20% refundable Ontario Business-Research Institute Tax Credit
3 The 4.5% Ontario Research and Development Tax Credit
4 Tax rates for large manufacturers: Federal 15.0% plus Ontario 11.0% = 26.0%


Canada's R&D Cost Advantage versus Other G7 Countries
Country Percentage
Canada +15.8%
United Kingdom +11.2%
France +10.8%
Italy +3.3%
Japan +1.1%
United States 0% (baseline)
Germany -0.4%


Canada's R&D cost advantage is 15.8% over the United States and is the most attractive among major industrialized countries according to KPMG's Competitive Advantage 2014.


More Costs Qualify for R&D Tax Credits in Ontario
Qualifying Costs Ontario United States
Wages and salaries Yes Yes
Capital equipment Yes No
Materials Yes Yes
Overhead Yes No
Contract expenses Yes 65 - 75%

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