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% |