Ontario Made Manufacturing Investment Tax Credit Calculator
A refundable credit on buildings, machinery and equipment bought for manufacturing or processing in Ontario. Work out what the credit is worth, what the asset really costs after it, and how it changes the depreciation you can claim.
refundable credit
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Do You Qualify
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The Credit and the Annual Limit
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What the Asset Actually Costs
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Points That Decide This
What to Do Next
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Disclaimer: The Ontario made manufacturing investment tax credit is a refundable credit available to a Canadian-controlled private corporation with a permanent establishment in Ontario that makes qualifying investments in buildings, machinery and equipment used in manufacturing or processing in Ontario. Qualifying investments broadly comprise expenditures for buildings included in Class 1 that are used in manufacturing or processing, and machinery and equipment used in manufacturing or processing that falls within the prescribed capital cost allowance classes for such property; the class references applicable to machinery and equipment have changed over time, so the classification of a particular asset should be confirmed for the year of acquisition. The property must become available for use in the taxation year for the credit to be claimed in that year, so an asset purchased but still being installed at the year end is generally claimed in a later year. The credit is subject to an annual limit on qualifying investments, which must be shared among associated corporations, and is prorated for short taxation years. An investment tax credit is generally treated as government assistance that reduces the capital cost of the property for capital cost allowance purposes, so claiming the credit reduces the base on which depreciation is taken; the calculation shown here applies that reduction but is a simplified illustration that does not model half-year rules, immediate expensing limits, the accelerated investment incentive, recapture, or the sharing of any immediate expensing limit among associated corporations. Whether property is used in manufacturing or processing is a question of fact, and mixed-use property may require apportionment. The credit rate, annual limit, capital cost allowance treatment and the schedules required to claim the credit are all subject to legislative change, so every rate and limit on this page is an editable input that should be replaced with the figures applicable to your taxation year. This page is general information, not tax advice.
A Refundable Credit, Which Is the Important Word
Refundable means the money arrives whether or not the corporation is paying tax. A manufacturer having a poor year, or one that has just spent heavily and has little taxable income left, still receives it.
That distinguishes it from most credits, which only reduce tax you would otherwise pay. It also makes it particularly valuable in the year of a large investment, which is exactly when a corporation is most likely to be short of cash.
The credit arrives with the return. It is claimed on the corporate return for the year the property becomes available for use, so the cash comes after the year end rather than at the time of purchase. Financing the asset still has to bridge that gap.
What Counts as Qualifying
Two categories. Buildings used in manufacturing or processing, and machinery and equipment used in manufacturing or processing. Both have to be for use in Ontario, and the corporation has to be a CCPC with a permanent establishment here.
The test is what the asset is used for, not what industry the company is in. A distribution business that carries out genuine processing may have qualifying assets, and a manufacturer’s office fit-out generally does not.
| Condition | Requirement |
|---|---|
| Corporation type | Canadian-controlled private corporation |
| Location | Permanent establishment in Ontario |
| Asset use | Manufacturing or processing in Ontario |
| Timing | Available for use, not merely purchased |
| Amount | Subject to an annual limit, shared if associated |
Available for Use Is the Timing Trap
The credit is claimed for the year the property becomes available for use, not the year it was ordered or paid for. A machine delivered in November and still being commissioned at a December year end is generally a next-year claim.
That matters when an investment straddles a year end, and it is occasionally worth managing. Getting a machine commissioned and into production before the year end rather than a fortnight after can move a substantial refund a full year earlier.
The annual limit is shared across an associated group. Corporations that are associated share one limit, so a group making several investments in one year can exhaust it. Where investments can be timed across two years, splitting them may capture more credit than bunching them.
The Credit Reduces What You Can Depreciate
This is the part that gets missed. An investment tax credit is generally treated as government assistance that reduces the capital cost of the asset, so the base on which capital cost allowance is claimed goes down by the amount of the credit.
The credit is still clearly worth having. But the benefit is not the full credit plus full depreciation on the original cost; it is the credit plus depreciation on the reduced cost. Comparing the two properly is the difference between a realistic projection and an optimistic one.
It interacts with immediate expensing too. Where a full deduction is available in the first year, it applies to the reduced capital cost rather than the original. The calculation here shows both so the interaction is visible rather than assumed.
Mixed Use Needs Apportionment
A building that houses both production and a showroom, or equipment used partly for processing and partly for something else, generally needs to be apportioned. The qualifying part is the part used in manufacturing or processing.
That apportionment should be documented at the time on a sensible basis, floor area or usage, because reconstructing it during a review is considerably harder than recording it when the asset goes in.
What This Calculator Does Not Cover
- Half-year rules and the accelerated investment incentive
- Immediate expensing limits and their sharing among associated corporations
- Recapture if the asset is sold or converted to another use
- Short taxation years, where the limit is prorated
- Whether particular activities are manufacturing or processing
- Other assistance such as grants, which may also reduce the capital cost
Timing and classification are where this is won or lost. Our manufacturing accounting service covers whether assets qualify, when to bring them into use, how the limit is shared across a group, and the depreciation interaction. Manufacturers developing new processes should also look at the SR&ED calculator, since the two often apply in the same year.
Frequently Asked Questions
Common questions on the manufacturing investment credit.
Related Calculators and Guides
More for Ontario manufacturers.
Time the Purchase Before the Year End, Not After
Send us what you are buying, what it will be used for and when it will be running. We will confirm whether it qualifies, whether bringing it into use before the year end moves the refund a year earlier, how much of the annual limit your group has left, and what it does to the depreciation.