(4) Eligible expenditures in Manitoba are those that qualify for federal ITC purposes. In its
2013 budget, Manitoba announced that the province will protect its tax credit from capital
expenditures removed from the federal investment tax credit base announced in the
2012 federal budget. In addition, the Manitoba tax credit retains full eligibility for contract
payments to eligible institutes only.
The 2013 Manitoba budget announced that the province’s ITC will reflect the following
changes included in the 2012 federal budget:
• the SR&ED tax credit will be adjusted to reduce the 60% prescribed proxy amount –
which recognizes overhead costs attributable to eligible projects – from 60% of direct
labour costs in 2013 to 55% in 2014.
• contract payments are 80% claimable instead of fully claimable, so that tax credits
will no longer include the profit element under the contract fees.
The 20% tax credit is fully refundable if the eligible expenditures are incurred after 2009
and by a corporation with a PE in Manitoba and where the research and experimental
development is carried on in Manitoba under contract with a qualifying research institute in
Manitoba.
Manitoba extended the refundability of this tax credit to in-house R&D expenditures (i.e.,
R&D not undertaken under contract with an institute in Manitoba) incurred in 2012 and
subsequent years to 50%.
For eligible expenditures incurred prior to 2010, the tax credit was non-refundable. Unused
non-refundable credits earned in taxation years ending after 2003 may be carried forward
10 years and carried back three years. Unused credits earned in prior years may only be
carried forward seven years.
The tax credit (refundable and non-refundable) is considered to be government assistance
and reduces federal expenditures for both the R&D deduction and ITCs. All or part of
the credit can be renounced each year, however, the renunciation must be made in
the year the credit was earned and no later than 12 months after the filing due date of
the corporate income tax return. The tax implications for federal purposes are different
depending on whether the credit is renounced by the filing due date or after the filing
due date. Requests to renounce the Manitoba ITCs after the deadline will be denied.
(5) Eligible expenditures in Ontario are those that qualify for federal ITC purposes and are
not in excess of the expenditure limit. The expenditure limit is $3 million. All current
expenditures and 40% of capital expenditures qualify for the credit. The credit is available
to corporations with taxable income under the federal small business income threshold,
and taxable paid-up capital (for Ontario capital tax purposes) of less than $25 million, in the
preceding year. The corporation’s expenditure limit will be reduced where either of these
restrictions are exceeded by the associated group, and, for taxation years ending after
2009, will be eliminated once taxable income of the group reaches $800,000 or taxable
paid-up capital exceeds $50 million, in the preceding year. Transitional rules apply if a
corporation does not have a calendar year end.
(6) In Ontario, an eligible research institute contract is an R&D contract with an eligible
research institute (i.e., certain post-secondary and hospital research institutions, and
prescribed non-profit research organizations). Eligible expenditures, as defined for federal
ITC purposes, are limited to $20 million per year.
Provincial Research and Development Tax Incentives / 89
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