Ontario Business Tax Credits, Incentives & Deductions Directory (2025)
Ontario, Canada's largest economic engine, is home to a diverse business landscape spanning manufacturing, technology, media, green energy, finance, and more. The province offers one of North America's lowest small business corporate tax rates and a comprehensive array of tax credits and incentives designed to drive entrepreneurship, innovation, and economic competitiveness.
Strategic provincial tax incentives play a central role in helping businesses reduce their effective tax rate, enhance cash flow, and invest in growth. From the cornerstone Small Business Deduction (SBD), which supports startups and SMEs, to generous refundable credits for R&D, hiring, digital media, green investment, property, regional development, and more—Ontario’s programs are designed to be stackable with federal incentives. This means companies can often receive refunds or tax savings from both the Ontario and federal governments, maximizing their after-tax benefit.
This directory provides authoritative, in-depth guidance and step-by-step instructions for every major Ontario business tax credit, including eligibility rules, claim strategies, stacking tips, and real-world calculation examples. Whether you’re a manufacturer, tech firm, digital media producer, or service business, you’ll find the tools to optimize your tax position and audit-proof your claims.
- What’s Covered: Ontario’s most important business tax credits, grants, and deductions—plus eligibility and claim tips.
- Who’s Eligible: Ontario-registered corporations, small businesses, startups, manufacturers, digital/media firms, and more.
- Quick Links: Directory, Audit & Documentation, Stacking Scenarios, FAQ, Related Topics
For federal programs, visit: Canada-Wide Business Credits
Ontario Business Tax Credits & Incentives Directory
Ontario Small Business Deduction (SBD)
The reduced Ontario corporate tax rate on the first $500,000 of active business income for CCPCs. Eligibility: CCPCs with a permanent establishment in Ontario and taxable capital under $15M. How to claim: Complete ON428, Schedule 500, and related T2 schedules; allocate SBD among associated corporations. Example: $400,000 active business income yields a $12,800 Ontario tax bill at the 3.2% rate, a $21,200+ savings over the general rate. Docs: T2, Schedule 500, association docs. Full guide → Ontario Innovation & SR&ED Tax Credits
Ontario Innovation Tax Credit (OITC), Ontario Research & Development Tax Credit (ORDTC), and how to stack with federal SR&ED. Eligibility: Incorporated businesses with eligible Ontario R&D expenditures. How to claim: File ON479, ON565/508/566, and federal SR&ED forms. Example: $100,000 eligible R&D may yield $8,000 OITC, $3,500 ORDTC, and up to $35,000 federal SR&ED. Docs: Payroll, technical reports, T661, ON schedules. See details → Ontario Hiring, Training & Apprenticeship Incentives
Co-operative Education Tax Credit, Apprenticeship Training Tax Credit, Job Grant, wage subsidies, and more. Eligibility: Ontario employers hiring co-op students, apprentices, or upskilling staff. How to claim: Register placements, file ON550/556 and T2, apply for grants pre-hire. Example: Hiring a co-op student can earn a $3,000–$5,000 credit. Docs: Payroll, contracts, registration. Explore incentives → Ontario Digital Media, Film & Content Credits
Ontario Interactive Digital Media Tax Credit (OIDMTC), Film/TV credits, Book Publishing, and more. Eligibility: Incorporated Ontario companies producing digital media/film. How to claim: Apply for OMDC certificate, file ON479 & T2. Example: Up to 40% of Ontario labour costs for digital media. Docs: Certificate, payroll, project files. Explore media credits → Ontario Energy, Green, & Manufacturing Credits
Business Research Institute Tax Credit (OBRITC), energy property tax incentives, manufacturing credits, and more. Eligibility: Ontario businesses investing in manufacturing, clean tech, energy efficiency. How to claim: Register projects, file ON479/OBRITC schedule, keep all invoices. Docs: Technical docs, invoices, certifications. See green credits → Other Ontario Business Credits & Deductions
Employee stock option, regional investment, charitable donations, property tax rebates, and sectoral credits. Eligibility: Varies by program. How to claim: File relevant ON/CRA forms, keep all receipts. Docs: Receipts, option agreements, municipal letters. Browse all →
The reduced Ontario corporate tax rate on the first $500,000 of active business income for CCPCs. Eligibility: CCPCs with a permanent establishment in Ontario and taxable capital under $15M. How to claim: Complete ON428, Schedule 500, and related T2 schedules; allocate SBD among associated corporations. Example: $400,000 active business income yields a $12,800 Ontario tax bill at the 3.2% rate, a $21,200+ savings over the general rate. Docs: T2, Schedule 500, association docs. Full guide → Ontario Innovation & SR&ED Tax Credits
Ontario Innovation Tax Credit (OITC), Ontario Research & Development Tax Credit (ORDTC), and how to stack with federal SR&ED. Eligibility: Incorporated businesses with eligible Ontario R&D expenditures. How to claim: File ON479, ON565/508/566, and federal SR&ED forms. Example: $100,000 eligible R&D may yield $8,000 OITC, $3,500 ORDTC, and up to $35,000 federal SR&ED. Docs: Payroll, technical reports, T661, ON schedules. See details → Ontario Hiring, Training & Apprenticeship Incentives
Co-operative Education Tax Credit, Apprenticeship Training Tax Credit, Job Grant, wage subsidies, and more. Eligibility: Ontario employers hiring co-op students, apprentices, or upskilling staff. How to claim: Register placements, file ON550/556 and T2, apply for grants pre-hire. Example: Hiring a co-op student can earn a $3,000–$5,000 credit. Docs: Payroll, contracts, registration. Explore incentives → Ontario Digital Media, Film & Content Credits
Ontario Interactive Digital Media Tax Credit (OIDMTC), Film/TV credits, Book Publishing, and more. Eligibility: Incorporated Ontario companies producing digital media/film. How to claim: Apply for OMDC certificate, file ON479 & T2. Example: Up to 40% of Ontario labour costs for digital media. Docs: Certificate, payroll, project files. Explore media credits → Ontario Energy, Green, & Manufacturing Credits
Business Research Institute Tax Credit (OBRITC), energy property tax incentives, manufacturing credits, and more. Eligibility: Ontario businesses investing in manufacturing, clean tech, energy efficiency. How to claim: Register projects, file ON479/OBRITC schedule, keep all invoices. Docs: Technical docs, invoices, certifications. See green credits → Other Ontario Business Credits & Deductions
Employee stock option, regional investment, charitable donations, property tax rebates, and sectoral credits. Eligibility: Varies by program. How to claim: File relevant ON/CRA forms, keep all receipts. Docs: Receipts, option agreements, municipal letters. Browse all →
Tip: For most credits, you must file specific Ontario schedules (ON479, ON500, ON565, etc.) with your T2 corporate tax return. Many programs require pre-approval or registration. Always keep detailed documentation (invoices, payroll, contracts, technical reports) for audit-proof claims.
Stacking Ontario and Federal Credits: Practical Scenario
Example 1: An Ontario CCPC invests $120,000 in eligible R&D. The company claims:
- $9,600 Ontario Innovation Tax Credit (8% of $120,000)
- $4,200 Ontario R&D Tax Credit (3.5% of $120,000)
- Up to $42,000 federal SR&ED (35% of $120,000, if eligible)
- Total refund/credit: $55,800 (potentially more with additional incentives)
Example 2: A digital media company with $200,000 in Ontario labour costs for a game project claims:
- $80,000 OIDMTC (40% of $200,000)
- Potential federal interactive digital media credits (if eligible)
- Stacked with SR&ED if project work qualifies as experimental development
Example 3: An SME claims the Small Business Deduction (SBD) on $400,000 active business income, saving over $21,000 compared to the general rate, while also claiming innovation credits for eligible R&D.
Stacking is allowed as long as you do not double-claim the same expenditures. Always deduct provincial credits from SR&ED claims as required. Review stacking rules annually.
Audit Risks, Common Errors, and Best Practices for Documentation
- Missing or incomplete supporting documentation (e.g. payroll, technical/project files, invoices, contracts) is a leading reason for denied credits or assessments. Always maintain digital and physical records for at least 6 years (7 for R&D/innovation credits).
- Double-claiming the same dollar for more than one credit (e.g. using the same wage for both OIDMTC and SR&ED) is a common audit trigger—separate and document expenditures for each claim.
- Not allocating the SBD limit among associated companies—must be reported and prorated where required.
- Missing registration or pre-approval for hiring, digital media, or green credits—some programs require registration before incurring eligible expenses.
- Claiming ineligible expenditures (e.g. out-of-province expenses, non-active business income) or failing to back out government assistance from eligible costs.
- Omitting required Ontario schedules (ON479, ON565, ON500, etc.) or failing to align T2 and Ontario schedules.
- Always reconcile and document calculations, allocation of credits, and program eligibility—include a summary memo with your records for each claim year.
Best Practice: Assign a staff member or advisor to maintain a dedicated folder for each tax credit claim year, containing all required receipts, contracts, payroll and technical documents, and correspondence. This is your audit defense file.
Practical Case Studies: Stacking Ontario & Federal Credits
Case Study: Tech Startup Stacking SBD and Innovation Credits
Scenario: Ontario CCPC with $350,000 active business income, $100,000 eligible R&D payroll.
- Ontario SBD: $350,000 x 3.2% = $11,200
- Federal SBD: $350,000 x 9% = $31,500
- OITC: $100,000 x 8% = $8,000 (refundable)
- ORDTC: $100,000 x 3.5% = $3,500 (non-refundable)
- Federal SR&ED: $100,000 x 35% = $35,000 (refundable)
- Total tax savings/refund: $89,200
Case Study: Manufacturer Claiming Green and Regional Credits
Scenario: Northern Ontario manufacturer invests $250,000 in new equipment and $50,000 in energy efficiency retrofits.
- Northern Ontario Regional Credit: $250,000 x 10% = $25,000
- Green Retrofit Credit: $50,000 x 15% = $7,500
- Property tax rebate from municipality: $8,000
- Federal Accelerated Investment Incentive: $300,000 x 30% write-off = $90,000 (depreciation deduction)
- Total benefit: $40,500 in credits + $90,000 accelerated CCA
Case Study: Digital Media Company Stacking OIDMTC and Wage Subsidies
Scenario: Digital media firm hires two co-op students at $30,000 each and has $150,000 in labour costs for a game project.
- OIDMTC: $150,000 x 40% = $60,000
- Ontario CETC (co-op credit): 30% x $60,000 = $18,000
- Federal SWPP wage subsidy: 70% x $60,000 = $42,000
- Note: Cannot claim >100% of wage costs—coordinate claims and keep proof of all credits/subsidies received.
Frequently Asked Questions: Ontario Business Credits
Can I claim both Ontario and federal credits for the same expenditure?
Yes, provided you follow program-specific stacking rules. For SR&ED, you must deduct provincial credits from your federal claim. For hiring and digital media credits, coordinate claims to avoid double-claiming the same wage dollar.
How do I avoid audit issues?
Keep organized, complete documentation for each credit: payroll, contracts, technical reports, application approvals, and evidence of registration where required. Document the allocation of expenditures and credits, and keep records for 6–7 years.
What if I miss a deadline or required Ontario schedule?
Most credits must be claimed within 18 months of your corporation’s fiscal year-end. If you miss a schedule, file an amended T2 return (T2-ADJ) as soon as possible. Some credits cannot be retroactively claimed if you miss the deadline.
Are startups and loss-making companies eligible for Ontario business credits?
Yes! Many Ontario credits, especially refundable ones (like OITC, OIDMTC, CETC), provide cash refunds even when your corporation has no taxable income.
Do I need to apply for credits before incurring costs?
Some credits (e.g., OIDMTC, wage subsidies, certain green/energy or regional credits) require pre-approval or registration before incurring eligible expenses. Always check each program’s requirements.
Can I combine multiple Ontario credits?
Yes, you may claim multiple credits in the same year, but you cannot double-claim the same dollar of expenditure. Always disclose other assistance in your claim schedules.
Where can I get help with complex claims?
Consult a qualified tax advisor or accountant familiar with Ontario business credits, or contact the Ontario Ministry of Finance for guidance. For R&D or digital media claims, consider engaging a specialist if your claim is large or complex.