In the 2018 Ontario Budget released in March, the Ontario Government announced proposed changes to the Small Beer Manufacturers’ Tax Credit. On Monday (Apr 9), Ontario’s Minister of Finance, Charles Sousa, highlighted some of those proposed changes and what they would mean for Ontario’s small breweries in a more practical way.
What’s the Big Deal about Small and Microbreweries?
- Craft beer is a rapidly expanding sector in Ontario.
- Craft beer employs thousands of people.
- In 2016/17, Craft beer generated over $89 million in sales through the LCBO.
- 250 craft breweries current operate in Ontario, and 133 of those sell via the LCBO.
- Craft beer as an industry generated $370 million in sales in Ontario in 2017, up approximately $130 million from recorded sales in 2015.
Practical Tax Changes to Support Small and Microbreweries
The proposed changes include:
- Expanding the sale of beer in 350+ grocery stores, with an eventual goal of availability in 450 grocery stores, where at least 20% of beer shelf space will be reserved for products from small breweries.
- Allowing breweries to have a bar or restaurant at each of their licensed manufacturing locations.
- Reducing the beer tax rate by 50 cents per litre (from 90 cents to 40 cents) for microbrewery sales.
- Eliminating the tax on up to 10,000 litres of beer per year when used for promotional purposes (ie: samples, tastings, etc.)
- Increasing the amount of support for small and microbreweries with taxable sales between 75,000 and 200,000 hectolitres.
- Doubling worldwide production tax credit eligibility from 150,000 to 300,000 hectolitres.
Reinvest Savings in Innovation and Scientific Research and Experimental Development (SR&ED)
All these changes mean more companies will have opportunity to reinvest their savings in innovations and scientific research and experimental development (SR&ED) relating to their products.
Scientific research and experimental development credits may apply if the purpose of that research and experimentation in a fiscal year related to any of the following:
- New products, recipes, and/or packaging
- Improving shelf life and product durability
- Producing samples for evaluation
- Improving productivity processing speed while maintaining product quality
- Improving product consistency
- Scaling up production (ie: from hand-making process to automated; small production to retail production)
- Reducing waste