Since the announcement of the Ontario Made Manufacturing Investment Tax Credit, which recently opened its intake, we have received many questions from our clients. We are happy to share the most common questions and answers.
Question 1: We paid a 50% deposit on the machine in February 2023 and the balance in September 2023. The machine has been operational since October 2023. Do we qualify for a claim against 50% or 100% of the machine’s cost?
Answer: You qualify for a claim against 100% of the machine’s cost because it became available for use after March 22, 2023.
Question 2: We just completed the construction of a new industrial building for our business. It took three years to build, and we paid several installments to the construction firm. How much of the construction cost is eligible for a 10% refund?
Answer: 100% of the constriction cost is eligible for a 10% refund as long as the building became available for use after March 22, 2023.
Question 3: What does “becomes available for use” mean from an eligibility perspective?
Answer: “Available-for-use” date for buildings is defined as the date when the construction, renovation or alteration of the building is complete, or the applicant first uses the building for the purpose for which it was acquired.
The “Available-for-use” date for equipment is defined as the date when the applicant first uses the equipment to earn income or the date the equipment is delivered to the applicant and is capable of producing a commercially saleable product or service.
Question 4: Our operating company owns the equipment, but a related company owns the building. Do we qualify for a 10% refund against building costs?
Answer: Yes, you qualify because a related (associated) company owns the building, not a third-party landlord.
Question 5: We financed our equipment and building, and it will take years to pay off the loans. Do we qualify for a claim against 100% of the equipment and building costs or a portion of the costs we paid off this year?
Answer: You qualify for a claim against 100% regardless of how you’ve obtained financing. Please note, however, that leasing or rental costs are not eligible because you don’t own the asset.
Question 6: We closed our fiscal year with losses and don’t owe corporate income tax. Do we qualify?
Answer: Yes, you qualify and could get a refund even if you don’t owe corporate income tax. However, if you owe taxes from previous periods, the refund amount will be reduced accordingly.
Question 7: What kind of equipment is eligible?
Answer: Any machinery and equipment used in the manufacturing or processing of goods for sale or lease is eligible. However, transportation equipment, including forklifts, is not eligible.
Question 8: What kind of building is eligible?
Answer: Any industrial building with 90% of the floor space used for manufacturing or processing in Ontario is eligible
Question 9: We purchased a machine in August 2023, but our fiscal year is closed. How do we apply?
Answer: You can apply for a 10% refund by filing an amendment to your assessed corporate income tax return (T2) and submitting a special application form with refund calculations.
The Ontario Made Manufacturing Investment Tax Credit is a 10% refundable tax credit for capital investments in buildings, machinery, and equipment used in manufacturing or processing, which aims to bring manufacturing back to Ontario.
Eligibility requirements
- Be a Canadian‐controlled private corporation (CCPC)
- Have a permanent establishment in Ontario
- Make qualifying investments (incur eligible costs)
Eligible Costs
- Constructing, renovating or acquiring buildings used for manufacturing or processing that become available for use on or after March 23, 2023. To qualify as a building used for manufacturing, 90% of the floor space of the building must be used at the end of the corporation’s taxation year for manufacturing or processing.
- Machinery and equipment used in the manufacturing or processing of goods. The machinery and equipment would have to be acquired and become available for use on or after March 23, 2023, and before 2026.
Amount
The maximum amount of funding is 2M per taxation year and would be prorated for a short taxation year.