Available SRED credits differ whether you are a Canadian Controlled Private Corporation or a foreign company (Non-CCPC). These credits fall into one of two categories: refundable and non-refundable. If your company is eligible for a refundable tax credit, you will receive money back. If your company is eligible for a non-refundable tax credit, you will be able to use this amount of offset any corporate taxes owed.
Types of SRED Credits
There are three types of SRED credits available to CCPCs and non-CCPCs in Ontario:
- Investment Tax Credit (Federal) (ITC),
- Ontario Investment Tax Credit (OITC),
- Ontario Research and Development Tax Credit (ORDTC).
CCPCs vs Non-CCPCs
The main difference between these two types of companies is that the Canadian Controlled Private Corporation can apply for a 35% refundable federal tax credit (ITC) while the non-Canadian Controlled Private Corporation can only apply for the 15% non-refundable federal tax credit.
Below is a breakdown of the available SRED credits to CCPCs and Non-CCPCs with operations based in Ontario if the previous year’s taxable income does not exceed $800,000.
CCPC
OITC 10% refundable tax credit
ORDTC 4.5% non-refundable tax credit
ITC 35% refundable tax credit
Non-CCPC
OITC 10% refundable tax credit
ORDTC 4.5% non-refundable tax credit
ITC 15% non-refundable tax credit
If a foreign company is not profitable, it cannot benefit from the ITC or the ORDTC since both credits are non-refundable. A non-CCPC would only be able to benefit from the OITC, which is refundable.
Eligibility for Provincial Tax Credits
Again, this breakdown is specific to Ontario-based companies. Other provinces might have different credits and eligibility requirements. In BC, the British Columbia Scientific Research and Experimental Development Tax Credit for foreign companies is also non-refundable, and the Saskatchewan Research and Development Tax Credit is non-refundable even for CCPCs.