The New Ontario Made Manufacturing Investment Tax Credit

Overview

The new Ontario Made Manufacturing Investment Tax Credit (OMMITC) is a financial incentive designed to support and promote manufacturing within the province of Ontario. The OMMITC is a new 10% refundable tax credit, which aims to bolster local production capabilities, stimulate economic growth, and enhance job creation in the manufacturing sector. The OMMITC applies to eligible expenditures available for use after March 23, 2023. Qualifying expenditures of up to $20 million/year are eligible for a tax credit of up to $2 million.

Eligibility Criteria

To qualify for the OMMITC the following criteria must be met:

• Corporation must carry on business in Ontario, through a permanent establishment in Ontario such as a factory, office, or workshop.
• Corporation must be a Canadian Controlled Private Corporation (CCPC) throughout the tax year.
• Corporation must not be a tax-exempt entity.

Qualifying investments and expenditures and relevant classes

Class 1

• If a corporation builds, renovates or purchases a qualifying building where more than 90% of floor space is used for manufacturing or processing in Ontario, the investment should qualify for the OMMITC.

Class 53

• If a corporation purchases and makes available for use after March 23, 2023, and before 2026 machinery and equipment used in the manufacturing or processing of goods in Ontario, the expenditures should qualify for the OMMITC.

Class 43(a)

• If a corporation purchases and makes available for use after 2025 machinery and equipment used in the manufacturing or processing of goods in Ontario, the expenditures should qualify for OMMITC.

Benefits to Corporations

Corporations participating in the OMMITC program can realize several benefits which include:

• Increased Competitiveness: By investing in advanced manufacturing technologies, corporations can enhance their productivity and competitiveness both domestically and internationally.
• Cost Savings: The tax credit reduces the overall cost of investing in new equipment, allowing corporations to allocate resources to other areas of growth.
• Enhanced Innovation: Access to funding through tax credits encourages manufacturers to innovate, leading to the development of new products and processes.
• Positive Brand Image: Participating in the program can enhance a corporation’s reputation as a supporter of local manufacturing and sustainability.

Claiming the Credit

Here’s how we can assist:

• Eligibility Assessment: We’ll help you determine whether your business and its investments qualify for the OMMITC and provide advice on how to maximize the credit.
• Claim Preparation and Filing: Our team of tax professionals will prepare the necessary documentation and ensure that your claim is filed accurately and on time with your corporate income tax return.
• Compliance and Documentation: We’ll assist you in maintaining proper records and documentation to support your OMMITC claim, minimizing the risk of audits or challenges from tax authorities.
• Strategic Tax Planning: In addition to the OMMITC, we can help you explore other tax incentives, grants, and programs that can further reduce your tax burden and improve your business’s financial health.

Ongoing Support: Whether you’re planning a major expansion or simply upgrading your existing facilities, we’ll be there every step of the way to help you make the best financial decisions.

How to Claim the OMMITC

Claiming the OMMITC is relatively straightforward, but ensuring your claim is accurate and that you maximize the credit can be complex. Here’s what you need to do:

1. File with Your Corporate Tax Return: The OMMITC must be claimed on your corporate income tax return in the year the eligible investment is made.
2. Keep Detailed Records: It’s important to maintain accurate records of all qualifying investments, including invoices, contracts, and descriptions of the equipment or facilities purchased.
3. Seek Professional Assistance: To ensure that you’re meeting all requirements and getting the full benefit of the OMMITC, it’s advisable to work with tax professionals like Prasad & Company LLP. We have the expertise to manage your claim efficiently and minimize any risk of errors or omissions.

Schedule 572 – Specific Instructions

In order to claim the credit, ensure that the provincial jurisdiction is set to Ontario. This is very important particularly for newly incorporated companies. If Ontario is not selected, schedule 572 may not even appear in the tax software. Next, complete schedule 572. Even though the relevant capital asset additions are entered on schedule 8, they need to be entered again in Part 2 of schedule 572. Unfortunately, the information does not flow through from schedule 8 to schedule 572. At least not yet.

The tax software computes the OMMITC credit on the bottom of page 1 of schedule 572. The credit is then transferred to the T2 Jacket automatically. Schedule 572 is filed together with the T2 corporate tax return.

Summary

The OMMITC is a vital initiative aimed at revitalizing and strengthening the manufacturing sector in Ontario. It is important to note that the OMMITC is prorated for short taxation years. Furthermore, the OMMITC needs to be shared among an associated group. To learn more about OMMITC reach out to one of our experts. We’re here to help and guide you.