Ontario’s spring budget to propose manufacturing investment tax credit

By Elizabeth Raymer

Law360 Canada (March 22, 2023, 3:24 PM EDT) -- As part of its spring budget to be released March 23, the Ontario government will be proposing legislation to introduce a manufacturing investment tax credit of up to $2 million annually per company.

If passed, the legislation would create a new 10-per-cent refundable corporate income tax credit of up to $2 million a year for Canadian-controlled private corporations on qualifying investments in buildings, machinery and equipment for use in manufacturing or processing in the province, Ontario’s Office of the Premier announced on March 22.

“The proposed Ontario Made Manufacturing Investment Tax Credit would, if passed, provide an estimated $780 million over the next three years in Ontario income tax support to qualifying businesses,” the government said in its release.

In 2022, it said, Ontario secured more than 150 investment deals from a wide range of sectors including automotive, technology, manufacturing and life sciences.

The manufacturing sector in Canada’s most populous province has declined in recent years. By 2018, employment in this sector had declined by over 300,000 workers from 2004, according to Ontario’s statistics. The sector’s competitiveness was negatively affected “by the high cost of doing business, gaps in skills training programs, and a lack of business investment,” according to the statement.

“Our government is continuing to bring back the province’s manufacturing sector by attracting key investments and creating and protecting jobs in communities across the province,” said Minister of Finance Peter Bethlenfalvy. “The new Ontario Made Manufacturing Investment Tax Credit is just one part of our plan to build a strong economy for the future, today.”

The proposed new manufacturing investment tax credit would be available to Canadian-controlled private corporations that make qualifying investments and that have a permanent establishment in Ontario, defined as a fixed place of business including an office, a factory or a workshop. Tax credits would be available for up to a limit of $20 million per taxation year, with the limit prorated for a short taxation year.

“Qualifying investments would be expenditures for certain capital property included in Class 1 or Class 53 for capital cost allowance purposes,” the Office of the Premier said in its statement.

The province estimates that the actions it has taken “to save costs for businesses would enable an estimated $8 billion in cost savings and support for some Ontario employers in 2023, with $3.6 billion to go to small businesses.”

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