Research & Development Cost Advantage

Tax Credits Significantly Lower R&D Costs

When combined with federal R&D programs, Ontario's Research &Development tax incentive program is one of the most generous in the world. The after-tax cost of $100 in R&D spending can be reduced to between $55 and $37.

Large Manufacturers July 1, 2010 Public, Private or Foreign-owned	R&D Expenditures	R&D Expenditures at Eligible Ontario Research Institutes1
Gross Expenditure	$100.00	$100.00
Ontario – 20% OBRI Tax Credit2		(20.00)
Ontario – 4.5% ORDTC3	(4.50)	(3.6)
Federal Investment Tax Credit – 20%	(19.10)	(15.28)
Tax Deduction4 76.40 x 28.0%                          61.12 x 28.0%	(21.39)	17.11
After-tax Cost of $100 Expenditure	$55.01	$44.01

Notes:
1 Eligible Ontario research institutes include universities, colleges of applied arts and technology, research hospitals and other entities in Ontario.
2 The 20% refundable Ontario Business-Research Institute Tax Credit
3 The 4.5% Ontario Research and Development Tax Credit
4 Tax rates for large manufacturers: Federal 18.0% plus Ontario 10.0% = 28.0%

Canada's R&D Cost Advantage versus Other G7 Countries

Country	Percentage
Canada	+12.9%
France	+6.2%
United Kingdom	+2.9%
United States	0% (baseline)
Italy	-6.8%
Japan	-16.4%
Germany	-10.8%

Canada's R&D cost advantage is 12.9% over the United States and is the most attractive among major industrialized countries according to KPMG's Competitive Alternatives 2010.

More Costs Qualify for R&D Tax Credits in Ontario

Qualifying Costs	Ontario	United States
Wages and salaries	Yes	Yes
Capital equipment	Yes	No
Materials	Yes	Yes
Overhead	Yes	No
Contract expenses	Yes	65 - 75%