Manufacturing & Distribution Archives

2025 Provincial Budget – Ontario

Posted on May 16, 2025May 16, 2025 by ssiconolfi

On May 15, 2025, Ontario’s Minister of Finance, Peter Bethlenfalvy, presented the 2025 Ontario Budget – A Plan to Protect Ontario. The province’s budget includes the following tax measures:

Business Tax Measures

Corporate income tax rates

Ontario’s corporate income tax rates have not changed.

Ontario tax deferral

The budget provides businesses a reminder that the payment of select provincially administered taxes (e.g. employer health, gas, fuel, and others) may be deferred for six months, from April 1, 2025, to October 1, 2025. Although penalties will not apply for missed payments during this period, there is no deferral of tax return filing deadlines.

Ontario made manufacturing investment tax credit (OMMITC)

The refundable tax credit has increased from 10% to 15% on up to $20 Million of eligible investments per taxation year. Therefore, the maximum credit will increase from $2 Million to $3 Million per taxation year. The $20 Million limit must be shared amongst an associated group of corporations and will be prorated for short taxation years. Eligible investments include buildings and equipment used in manufacturing and processing (M&P) in Ontario, that are acquired and become available for use on or after May 15, 2025, and before January 1, 2030.

The credit has been extended to non-Canadian-controlled private corporations (“non-CCPCs”), which have a permanent establishment (“PE”) in Ontario. Non-CCPCs are eligible for a non-refundable tax credit (“NRTC”). Any unused NRTC’s could be carried forward up to 10 taxation years and applied against taxes payable.

The budget includes a repayment of the credit where after May 14, 2025, the eligible capital property is sold, converted to non-M&P use, or removed from Ontario within five years. The repayment amount would be the lesser of:

The total value of the credit; and
The credit amount relative to the value of the property at the relevant time.

Ontario shortline railway investment tax credit (OSRITC)

The budget introduces a 50% refundable tax credit for capital property (included in capital cost allowance classes 1, 3, or 13) and labour expenditures on railway-related maintenance made on or after May 15, 2025, and before January 1, 2030, by qualifying corporations. A qualifying corporation must be licensed either provincially under the Shortline Railways Act (Ontario) or federally (class II & III) under the Railway Safety Act and must have a PE in Ontario. The credit will be limited to $8,500 per track mile in Ontario and the labour expenditures are limited to railway track maintenance expenditures paid to individuals who are residents of Ontario for work performed in Ontario.

Personal Tax Measures

Personal income tax rates

Ontario’s personal income tax rates have not changed.

Ontario fertility treatment tax credit

The Ontario government has introduced a new fertility treatment tax credit effective January 2025, aimed at helping individuals with the costs of fertility services. The credit will cover 25% on up to $20,000 of eligible fertility- and surrogacy-related expenses, with a maximum tax credit of $5,000 per year. Eligible expenses include in vitro fertilization (IVF) cycles, fertility medications, diagnostic testing, and travel for treatment. This credit is available in addition to the non-refundable federal and Ontario medical expense tax credits for the same eligible expenses.

Other Tax Measures

Changes to Gas and Fuel Tax

Effective July 1, 2025, the tax on propane used in licensed road vehicles will be eliminated.

Additionally, the Ontario government has made permanent the reduced tax rate of 9¢ per litre on gasoline and fuel, which had previously been lowered from 14.7¢ for gasoline and 14.3¢ for fuel. These temporary reductions were originally set to expire on June 30, 2025.

Changes to Alcohol taxes

Effective August 1, 2025, the Ontario government is proposing amendments to the Liquor Tax Act, 1996 that would reduce alcohol-related tax rates. The spirits basic tax rate would be lowered from 61.5% to 30.75%. For Ontario microbrewers, the beer basic tax rates would be reduced from 35.96¢ to 17.98¢ per litre for draft beer, and from 39.75¢ to 19.88¢ per litre for non-draft beer (with transitional rules applying). Additionally, the refundable corporate Small Beer Manufacturers’ Tax Credit (SBMTC) will be adjusted to reflect these new rates, offering enhanced relief to qualifying corporations for eligible sales occurring after July 31, 2025.

U.S. Tariffs and Canada’s Response: Uncertainty Complications Tariff Mitigation

Posted on March 12, 2025March 12, 2025 by RSM US LLP

Executive summary

The ongoing tariff dispute between the U.S. and Canada has led to significant measures from both countries. As the situation remains dynamic, key strategies for Canadian businesses to manage these risks include using bonded warehouses, transfer pricing, tariff engineering, and diversifying supply chains.

U.S. tariffs on most Canadian goods—and Canada’s reciprocal measures—went into effect March 4 following a month-long delay. While tariffs on some Canadian goods were subsequently paused, tremendous trade uncertainty remains on both sides of the border.

The tariff situation continues to evolve as the U.S. administration eyes new products for protective tariffs and Canada rolls out its response at the federal and provincial levels.

Although the ongoing uncertainty makes planning tariff mitigation more complicated, the following strategies are still available for middle-market companies:

Bonded warehouses, foreign/free trade zones, and temporary import bonds. These mechanisms allow importers who meet certain requirements, such as limitations on work performed on the goods, to delay tariffs until the goods are distributed into the local market—or bypass tariffs where the goods are exported.

Transfer pricing. In related party transactions, transfer pricing ensures the price of the good is equivalent to the price in an arm’s length transaction. Companies should revisit their transfer pricing strategies to ensure the lowest defensible price is used.

Tariff engineering. This involves changes to the manufacturing process, manufacturing locations, and supply chain to change the classification of the goods.

Diversifying the supply chain and customers. The U.S. is the top export destination for numerous Canadian products. The current tariffs underscore the importance of diversification for Canadian businesses to limit the negative impacts of tariffs.

Participate in the comment period. Those operating in industries that could be affected by future tariffs—such as manufacturing, real estate and consumer products—could consider participating in the consultation.

You can read more about the ongoing tariff dispute below. The measures detailed below were accurate as of March 6 and are subject to change.

U.S. tariffs on Canada

The following tariffs impacting goods originating from Canada have been confirmed by executive order or official statement from the White House.

The term “CUSMA goods” refers to goods which meet the Canada-United States-Mexico Free Trade Agreement (CUSMA) rules of origin for goods originating in the territory of Canada, the U.S., and Mexico. Generally speaking, CUSMA goods will be wholly obtained or produced in North America, and/or meet requirements on regional content, processing or changes in tariff classification outlined in the CUSMA.

Scheduled effective date	Amount	Affected goods
March 4 – March 6	10%	Energy and energy resources^[1]
March 4 – March 6	25%	All, except energy and energy resources
March 7	10%	Energy, energy resources, and potash which are not CUSMA goods
March 7	25%	All non-CUSMA goods not captured in the 10% tariff.
March 12	25%	Steel and aluminium products and derivatives

Products whose value does not exceed US $800 will qualify for the de minimis exemption to the tariffs. The exception is only a temporary reprieve for goods subject to the March 7 tariffs as it will be removed once systems are in place to collect tariffs on these low-value imports.

U.S. President Donald Trump has also indicated the administration is considering the following additional tariffs. The details, including countries impacted, are not publicly finalized.

Scheduled effective date	Details
April 2	Reciprocal tariffs
April 2	Automobiles and agricultural products
Unknown	Approximately 25% tariff on semiconductors and pharmaceuticals

Along with the previously announced tariffs, the U.S. has indicated it is conducting reviews into other areas of concern:

April 1, 2025: Report on impact and recommendations regarding CUSMA.
August 12, 2025: Recommendations on reciprocal tariffs to respond to tariff and non-tariff measures, including value-added taxes believed to injure U.S. interests.
Nov. 22, 2025: Report on copper and copper products including potential recommendations for tariffs or export controls.
Nov. 26, 2025: Report on lumber and timber including potential recommendations for tariffs or export controls.
Unknown: Response to digital services taxes introduced by several countries, including Canada, on recommendation by the Organization for Economic Co-operation and Development (OECD).

Canada’s tariff response

Prime Minister Justin Trudeau confirmed on March 4 that Canada would implement a two-phase tariff response originally announced on Feb. 1. Trudeau added he would work with the provinces on further measures and look for other ways to support affected Canadians. One potential option he suggested was expansion and additional flexibility for employment insurance (EI).

Innovation Minister François-Philippe Champagne announced the guidance to the Investment Canada Act will be updated to require consideration of Canada’s economic security in allowing foreign acquisitions of or mergers with Canadian companies.

Along with initiating disputes before the World Trade Organization and using the CUSMA dispute resolution measures, Canada implemented its two-phase tariff response. A 25%t tariff was imposed on a subset of goods originating from the U.S. on March 4 and is scheduled to extend to a further list of goods following a 21-day consultation period. This tariff applies to both commercial and personal-use goods.

The following is a non-exhaustive and high-level list of impacted goods:

Initial group of goods

Food and drink products including dairy products, confectionaries, fruits and vegetables, beverages (alcoholic and non-alcoholic), cereals and spices.
Hygiene and beauty products, including perfumes, deodorants, soap and shavers.
Home furniture, décor, and home appliances.
Pneumatic tires, motorcycles, and unmanned aircraft.
Personal use bags (including handbags, suitcases).
Clothing, footwear, and accessories.
Products for outdoor activities (such as tents, sails, and life jackets).
Wood and wood products.
Paper and cardboard products (e.g. toilet paper, notebooks, and boxes).
Plastic packaging materials.
Tools.
Firearms and related products.
Tobacco and related products.

Extended group of goods

Live animals, fish, crustaceans, invertebrates, insects, and birds and the products thereof.
Flowers and trees, including their seeds/bulbs and the products thereof (e.g. bark, chocolate, and teas).
Vegetables, fruits, berries, cereals, mushrooms, and nuts and the products thereof (including oils, waffles, beverages, and pasta).
Minerals, clay, stones, ores, ceramic, metals, glass, and rocks (including products derived from coal).
Mineral or chemical fertilizers.
Electrical energy.
Polymers, resins, cellulose, and asbestos products.
Items used in artistic and athletic activities, as well as some toys, video game consoles, and collector items.
Apparel, accessories hygiene, cleaning products, home goods, and home appliances.
Machinery for construction, agriculture, printing, and additive manufacturing.
Certain vehicles, trailers, tankers, and boats.
Various electronic resistors, insulators, and semiconductor devices.
Various screws, bolts, springs, nuts, magnets, and batteries.

These tariffs will not apply to:

Certain equipment in the production of any vehicle, machine, or appliance, including original equipment manufacturer tires.
Goods made in the U.S. entering Canada for repair.
With certain exceptions, goods classified under Chapter 98 and 99 of the Customs Tariff. These chapters include special classification categories that consider factors such as use of goods (for example, foreign-based containers or trailers used in the international commercial transportation of goods).

Importers will be able to make use of Canada’s duties relief and duty drawback programs (subject to CUSMA) to bypass tariffs or receive a refund of tariffs on previously imported goods which are exported from Canada.

Provincial responses to U.S. measures

Many Canadian provinces are introducing their own responses to U.S. tariffs using measures within their jurisdiction—while some premiers are pushing to lower barriers to interprovincial trade.

Outlined below are measures from the provincial governments of Alberta, British Columbia, Quebec, and Ontario.

Alberta

Alberta announced it will no longer be purchasing alcohol or video lottery terminals from the U.S., nor will government entities—both provincial and municipal—be making purchases of goods and services from the U.S.

British Columbia

B.C. announced that:

Its liquor stores will no longer sell products from Republican-led states,
Canadian businesses will have priority in governmental procurement decisions; and,
It will introduce legislation to apply tolls to commercial trucks transiting through the province headed to Alaska.

B.C. Premier David Eby also indicated he’s looking to introduce support for affected businesses and individuals but did not provide details.

Ontario

The province-run LCBO has removed U.S. alcohol from its shelves, and U.S. companies will no longer be considered in government procurement and infrastructure contracts. A 25% export tariff on electricity headed to Michigan, New York, and Minnesota will apply as of March 10. Ontario Premier Doug Ford indicated he is considering other measures as well.

Quebec

Quebec’s government asked the province-run SAQ to no longer sell or supply U.S. alcohol. The province will also impose a penalty of 25% on U.S. companies bidding on government contracts without an existing presence in Quebec. Quebec said it will support affected domestic businesses by allowing companies to qualify for up to $50 million in liquidity loans with a maximum term of seven years.

[1] Includes crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water and critical minerals

This article was written by Cassandra Knapman and originally appeared on 2025-03-06. Reprinted with permission from RSM Canada LLP.
© 2024 RSM Canada LLP. All rights reserved. https://rsmcanada.com/insights/services/business-tax-insights/us-tariffs-and-canadas-response.html

RSM Canada LLP is a limited liability partnership that provides public accounting services and is the Canadian member firm of RSM International, a global network of independent assurance, tax and consulting firms. RSM Canada Consulting LP is a limited partnership that provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. The member firms of RSM International collaborate to provide services to global clients but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmcanada.com/about for more information regarding RSM Canada and RSM International.

The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

Trump’s Steel and Aluminum Tariffs Turn Uncertainty Into Concern for Canada

Posted on February 11, 2025February 12, 2025 by RSM US LLP

It took less than a week for the uneasy pause in trade tensions between Canada and the U.S. to reignite after U.S. President Donald Trump announced steep tariffs on steel and aluminum imports.

The 25% tariff, which is set to take effect on March 12, includes products from Canada — the largest source of U.S. steel and aluminum imports.

Although the tariffs apply to imports from all countries, Canada will be the most impacted by far as the U.S. imports a larger amount of steel and aluminum from Canada than any other country. Of note, aluminum imports from Canada are greater than the next 10 countries combined.

The tariff announcement also overrides current trade agreements the U.S. has with Canada, Mexico, the UK, Japan, and others.

As Canada considers its response, these tariffs — combined with the currently paused executive order targetting a broad range of Canadian goods — would severely impact Canada’s manufacturing sector.

This isn’t the first time Trump has levied tariffs on Canadian steel and aluminum. During his first administration in 2018 amid free-trade negotiations, U.S. tariffs on Canadian products — as well as Canada’s reciprocal tariffs — were in place for just over a year.

The economic hit appears confined within the manufacturing sector thus far. The loonie stayed steady, and if there are exemptions like in 2018 – which remains unclear at this moment – then the overall hit on Canada’s growth and inflation would be limited.

Manufacturing sector vulnerable

Manufacturing is the sector most vulnerable to tariffs due to the deep integration of the Canada-U.S.-Mexico supply chain. A significant 39.4% (641,000 jobs) of Canadian manufacturing jobs (641,000) rely on U.S. demand.

Canada’s 90,000 manufacturers contribute nearly 10% of the country’s gross domestic product (GDP), generate 1.9 million jobs, contribute to one-quarter of Canada’s business research and development spending and account for 60% of Canada’s exports according to the Canadian Association of Manufacturers and Exporters.

Canada’s manufacturing sector has faced multiple challenges and economic pressures in recent years, including the pandemic shock, supply chain disruptions, labour shortages, rising costs, and rising financing costs. The sector gradually began to recover as interest rates started to drop and the labour market stabilized. The manufacturing purchasing managers’ index (PMI) even signalled a return to growth at the end of 2024 after a prolonged period of contraction.

The disruption from Trump’s latest order would stall the progress made by the overall manufacturing sector and disproportionately affect Canada’s base metals production and processing industry.

Despite trade policy uncertainty, Canada’s manufacturing sector added a staggering 33,100 out of 76,000 total jobs gained in January. This surge, the largest since the pandemic-related wide swings in 2020, signals underlying optimism and is notable due to the struggles of goods-producing sectors in the last five years.

The takeaway

The only certainty with current U.S.-Canada tariff tensions remains uncertainty, so business leaders should keep a careful eye on the latest developments and act judiciously.

Ahead of the expected March 12 implementation, manufacturers could consider taking these proactive steps:

Understanding your supply chains and sourcing practices, identifying country-specific risks and vendor concentration vulnerabilities, assessing full landed cost of imported goods including tariffs. Explore alternative sourcing strategies and evaluate associated costs.
Assessing tariff planning strategies, including advancing deliveries ahead of the anticipated tariffs, utilizing bonded warehouses, foreign trade zones, and duty drawbacks programs.
Exploring expansion into new global markets, diversifying revenue streams, and distribution channels.
Modelling pricing strategies to determine the feasibility of passing additional costs to customers, as well as negotiating long-term contracts and cost-sharing arrangements with vendors.
Evaluating long-term shifts in supply chains, production and distribution footprint to be prepared for rapid changes, tariff increases, and other trade risks.
Optimizing operations by identifying opportunities for increased efficiency, cost reduction, raising workforce productivity, enhancing profitability throughout the value chain, and prioritizing investments that generate long-term values and deliver high returns on capital outlays.

This article was written by Irina Im, Tu Nguyen and originally appeared on 2025-02-11. Reprinted with permission from RSM Canada LLP.
© 2024 RSM Canada LLP. All rights reserved. https://realeconomy.rsmus.com/trump-steel-aluminum-tariffs-canada

Even with Pause, Trump’s Tariffs and Canada’s Response Establish Volatile New Economic Reality

Posted on February 3, 2025February 4, 2025 by RSM US LLP

After a weekend that saw U.S. President Donald Trump impose steep tariffs on Canadian goods and Prime Minister Justin Trudeau put forward retaliatory measures, the widely feared tariff war appears on hold after meetings between the two leaders on Monday.

Instead of taking effect Tuesday, implementation of tariffs will be paused by 30 days after Canada made additional commitments to invest in border security.

While businesses and consumers may welcome this reprieve, the back-and-forth between the longtime trading partners laid bare Canada’s economic vulnerability amid ongoing political volatility.

The U.S. tariffs set to take effect in 30 days include an additional 25% tariff on nearly all Canadian goods—with a 10% tariff on energy products.

In response, Canada’s retaliatory measures included a 25% tariff on $155 billion worth of goods from the U.S. The first phase would include tariffs on $30 billion in U.S. goods; the second phase would take effect 21 days after.

The U.S. also introduced a 10% tariff on all products from China. While Trump initially announced a 25% tariff on all goods from Mexico, its implementation was delayed for a month after meeting with Mexican President Claudia Sheinbaum.

Canada, Mexico, and China comprise more than 40% of all U.S. imports.

If the tariffs take effect after the pause, they will affect all countries involved—including pushing Canada into a recession, adding inflationary pressures, and leading to job losses. This comes after Canada managed to lower inflation to the Bank of Canada’s target last year without tipping the economy into a recession.

Despite the intercession, Canada should consider re-evaluating its trade relationships. Strategies that could address this include expanding and strengthening trade relations with other countries and removing interprovincial trade barriers to allow more seamless domestic trade.

Although there will be increased costs in the short-to-medium term, diversification to de-risk is a lesson from the COVID-19 pandemic that can prove useful now.

Dire economic impacts

U.S. tariffs and Canada’s retaliation would lead to a 2% reduction in the Canadian economy, down from a projected growth rate of 1.8% this year.

The measures by both sides could also lift inflation from the current 2% to a 2.7% headline number as Canadian consumers end up bearing some of the increased costs from tariffs.

The depreciation of the Canadian dollar could mitigate the prices of exports for U.S. importers, but this exacerbates the pain for Canadian businesses and consumers.

Industries that are highly integrated across borders, including auto manufacturing and even agriculture, could come to a standstill rapidly if tariffs are implemented.

Job losses should be expected across Canadian industries, from manufacturing to tourism to transportation. Higher prices decrease demand, which means aggregate demand for goods across the U.S. and Canada would drop, leading to fewer jobs.

For Canadian households, this means an increase in prices of multiple consumer goods like groceries, appliances, and especially vehicles.

Prices of perishable goods such as fruits and vegetables are likely to jump quickly if tariffs are enacted, given that they cannot be stockpiled in advance.

Although the price of goods like appliances and cars would take longer to increase, they will inevitably rise if tariffs take effect.

Despite the pause, Canada should consider re-evaluating its trade relationships

In addition to higher prices, expect a smaller selection of available goods should tariffs come into force—especially fewer U.S.-made products in stores.

Businesses that are the most vulnerable to tariffs are those that frequently import and export their goods and are part of a highly integrated supply chain. This burden will be acutely felt in situations where it’s possible that goods will be subject to tariffs each time they cross the border.

Companies that produce goods in one country and sell in another, such as Canadian manufacturers that sell to U.S. consumers, would also take a hit.

Other businesses likely to be strained by tariffs are those with tight margins and without healthy cash reserves. They may be forced to pass on the costs to consumers and might run into cash-flow issues since they must pay the tariffs upfront and might not receive payments until much later.

Canada’s response

Should the U.S. follow through on tariffs after 30 days, Canada’s response would be much more targeted. Its two-wave approach allows businesses to stock up in advance, mitigating the impact on Canadian businesses.

Goods targeted in the first round include orange juice, peanut butter, alcohol, and apparel, which are not top imports from the U.S. into Canada.

Canada has close substitutes produced domestically and also imports products like apparel from countries such as China or Vietnam. This strategy could help mitigate the immediate hit to consumers’ wallets as many are likely to switch to non-U.S. substitutes.

But Canada’s later wave of tariffs includes top imports from the U.S. like passenger vehicles, aerospace products, trucks, and buses. In addition to significant supply chain disruptions, consumers can expect to see auto prices go up substantially.

Before the pause was announced, individual provinces implemented non-tariff responses to the U.S. measures.

Alcohol is one product where there are plenty of domestic options and non-U.S. import substitutes, meaning Canada’s decision is designed to hurt U.S. producers without causing too much pain to local consumers.

Additional insights

The Canadian dollar is expected to slide further to mitigate the impact of tariffs on Canadian exports to the U.S. in the event tariffs take effect. Previously, tariff threats pushed the loonie from 0.72 US before the election to 0.69 US—a level not seen since the early days of the pandemic.

While the depreciation of the Canadian dollar would make imports more expensive for Canadians, the net effect on inflation is far from one-to-one. The economic blow from tariffs would decrease aggregate demand, keeping prices from rising too much.

In the short-to-medium run, most of the increase in prices would be borne by consumers, not exporters.

The impact of tariffs extends beyond traded goods between Canada and the U.S. The unemployment rate would spike as jobs are lost, which lowers demand for all goods and services like new cars, dining out, and entertainment. Restaurants, hotels, and other services in border towns will be particularly hard hit.

The effect on each industry and each good depends on whether there are close Canadian substitutes to U.S. imports and how well supply chains can work around tariffs. For example, tariffs and retaliation would devastate auto companies in Canada, the U.S., and Mexico and leave them unable to compete with businesses in Asia or Europe.

The takeaway

Trudeau and Trump may have agreed to a pause, but the threat of a puzzling, lose-lose trade war launched by the Trump administration remains a serious concern.

If U.S. tariffs do take effect and Canada responds in kind, the disruption will slash billions of dollars from Canada’s Gross Domestic Product (GDP) this year and can hurt businesses and households in Canada, Mexico, and the U.S.

If tariffs turn out to be long-lasting, they will present another complete disruption to the Canadian economy and supply chains—a second in five years following the pandemic.

The scenario in which economic damage is minimized is one in which a trade agreement is negotiated, putting an end to tariffs. The longer tariffs and retaliation continue, the more fractured and uncompetitive the three countries’ economies become—and the more economic pain consumers would feel from higher prices, fewer goods available and fewer jobs.

This article was written by Tu Nguyen and originally appeared on 2025-02-03. Reprinted with permission from RSM Canada LLP.
© 2024 RSM Canada LLP. All rights reserved. https://realeconomy.rsmus.com/trump-tariffs-canada-response

Ontario Made Manufacturing Investment Tax Credit

Posted on November 12, 2024May 13, 2025 by dflanagan

Overview

The Ontario made manufacturing investment tax credit was passed alongside Ontario 85 bill on May 18, 2023. It is a refundable investment tax credit designed to support manufacturers in Ontario. Eligible Canadian-controlled private corporations (CCPCs) can receive a 10% tax credit on qualifying investments in manufacturing and processing (M&P) property, up to a maximum $2 million per year. For investments of up to $20 million annually, corporations can claim this credit to reduce their tax liability and reinvest in their business.

Qualification Criteria: Does your corporation qualify?

The corporation must meet ALL the following criteria to claim the credit:

Be a CCPC throughout the tax year;
Have a permanent establishment in Ontario, actively carrying on business throughout the year;
Not be exempt from Ontario corporate tax during the year

Eligible vs Ineligible Purchases

For corporations to qualify for the credit they must ensure that purchases are NOT excluded property as these properties are considered ineligible for the tax credit claim. From a general standpoint, M&P properties purchased from a third party are considered eligible. Provided below is a more detailed outlook of the M&P property purchases that are customarily considered acceptable:

There are two main classes of investment purchases that qualify for claim of this credit. These include capital cost allowances (CCA) classes 1 and 53. Below is a detailed look of the requirements for each class:

Class 1

Includes buildings that become available for use after March 22, 2023.
Consists of buildings that are primarily used (at least 90% of the floor space) for manufacturing or processing purposes at the end of the year. The credit may also apply to buildings under construction or undergoing renovations, provided they meet the manufacturing use requirement.
The building must also be eligible for an additional 6% CCA claim.
- To satisfy this requirement the corporation must make an election under regulation 1101(5b.1) of the Federal Income Tax Act.

Class 53

Includes machinery and equipment that became available for use after March 22, 2023.
Machinery and equipment that are used in Ontario for manufacturing or processing of the goods for lease or sale.
Property that the corporation leases in the ordinary course of business that is used primarily for manufacturing or processing of goods for lease or sale will also qualify.

Ineligible Claims & Excluded Property

A claim will be deemed ineligible if the expenditure was acquired by the following means:

If there is an existing contract with a non-arm’s length individual or partnership at the time of acquisition.
For the case of amalgamation, if the predecessor corporation was deemed as a non-qualifying corporation prior to amalgamation.

An M&P property will be deemed an excluded property and will be ineligible to claim the Ontario made manufacturing investment credit if one of the following criteria are met:

If at any time during the properties existence the property was owned by a non-arm’s length party or purchased from a non-arm’s length party.
If the credit was previously claimed by an associated corporation or the qualifying corporation.
If the reason for holding the property was for a leasehold interest by an associated corporation or the qualifying corporation.
If the property was leased to a non-profit organization or a registered charity or any other property that is considered exempt from paying tax under section 149 of the Federal Income Tax Act.
If the M&P property was purchased from a seller who has a right or option to either lease or acquire a portion or all the property.
If the corporation that qualifies for the exemption provides a buyer with an option or right to purchase the property.
If the property was transferred following an election from a Class 1 asset to a Class 2 or 12.

How To Claim the Credit

Corporations must file Schedule 572 with their corporate income tax return to claim the Ontario Made Manufacturing Investment Tax Credit. It is essential to file within 6 months after the end of the corporation’s tax year to ensure eligibility. Late filings may result in the credit being denied.

How The Credit Is Calculated

The credit is calculated as 10% of the total eligible expenditures for the year, up to a maximum of $2 million. If a corporation (or group of associated corporations) makes qualifying investments exceeding $20 million, the total credit claimed is still capped at $2 million annually.

Example:

A manufacturing corporation invests $12 million in a new manufacturing facility and $8 million in machinery during the year, for a total investment of $20 million. The corporation can claim a 10% credit on the total qualifying expenditures, resulting in a $2 million tax credit.

If this corporation is associated with another company, the total credit of $2 million must be shared between them, and the total qualifying expenditures (up to $20 million) must be allocated across both companies.

Key Takeways

The Ontario Made Manufacturing Investment Tax Credit provides a significant opportunity for manufacturing businesses or reduce their tax burden on qualifying investments in Ontario. With a refundable tax credit of up to $2 million annually, this incentive can help corporations reinvest in their operations. While there is no immediate deadline for the credit, the Ontario government plans to review the review the program in three years, which may lead to future changes.

Below are key considerations to keep in mind when applying for the Ontario made manufacturing investment tax credit:

The investment limit will be prorated for short taxation years.
The amount of the $20 million expenditure limit must be allocated among all associated corporations.
The total claim for the credit is 10% of the amount of eligible qualifying investments for a maximum of up to $2 million dollars per year.

The Ontario Made Manufacturing Investment Tax Credit is considered a government inducement, subsidy or grant. Therefore, the resulting refund would be considered taxable income and would need to be reported in the year it is received. For more detailed advice on how your business can benefit from this credit, please contact one of our trusted advisors.

New Mandatory System for Canadian Importers (CARM)

Posted on April 25, 2024April 25, 2024 by Edixon

The CARM system, set to launch on May 13, 2024 has been delayed until October 2024. The Canada Border Services Agency (CBSA) cited the cause for delay is related to the potential impact on their operations should members of the Public Service Alliance of Canada, which represents over 9,000 employees of the CBSA, choose to strike. The Public Service Alliance of Canada launched a strike vote on April 10th.

Though the delay affords importers and other trade chain partners additional time to register for a CARM Client Portal (CCP) account and make related procedural changes, it is clear the CBSA intends to proceed with implementing CARM as the mandatory system of record. Those who import commercial goods into Canada should register their businesses in the CCP and delegate necessary authorities as soon as possible to avoid any potential delays and registration issues in October. Importers looking to use the Release Prior to Payment program should also ensure they are positioned to post the necessary security.

Background

The new system when in place will serve as the official platform for interacting with the Canada Border Services Agency (CBSA) regarding commercial import shipments into Canada. If your corporation imports goods and materials, we recommend that you proactively complete necessary registrations and meet requirements before this date to avoid disruptions in importing and conducting business with the CBSA.

Key points about CARM (CBSA Assessment and Revenue Management):

Mandatory System: The CBSA has announced that CARM will become the mandatory system for Canadian importation. It introduces significant procedural changes for importers.
CCP Account: Importers must register for a CARM Client Portal (CCP) account to continue their importing activities. Without a CCP account, importers will be ineligible to import goods after October 2024.
Supply Chain Considerations: Importers should anticipate potential disruptions and consider increasing critical imports into Canada before the CARM system’s implementation.

Remember to gather the necessary information (such as GCKey, Business Number, and Import/Export Program account) to complete your CCP registration and ensure smooth operations with the CBSA. Individual access and authorization levels within the business account should also be addressed.

For more detailed information on this new mandatory system, please refer to the full article, as written by RSM Canada.

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Have you Considered the Scientific Research and Experimental Development Tax Credit?

Posted on February 8, 2024June 5, 2024 by Edixon

Is your corporation involved in such activities as agricultural and food processing, information and/or communication technology, life sciences, advanced manufacturing, or independent research to name a few. If so, you may be eligible to claim a Scientific Research and Experimental Development Tax Credit (SRED). When we think of scientific research, we often think of the scientist in the lab wearing a white coat. This isn’t always the case as many claims are a result of development or improvements to a product or process on the shop floor.

In order to qualify, the work must be conducted for the advancement of scientific knowledge or for the purpose of achieving a technological advancement. It is important to note that you do not have to achieve your goal in order to gain new knowledge. For example, if your work allowed you to understand that the idea you tested is not a solution for your situation, this can be considered new knowledge. What’s important is that the knowledge gained advances the understanding of science or technology, not how the work advanced your corporation or business practices.

The work must be a systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis. A systematic investigation or search refers to how SRED work is carried out. It is more than just having a systematic approach to your work or using established techniques or protocols. A systematic investigation or search must include the following steps:

Defining a problem.
Advancing a hypothesis towards resolving that problem.
Planning and testing the hypothesis by experiment or analysis.
Developing logical conclusions based on the results.

The federal government will allow corporations to claim an Investment Tax Credit (ITC) of 15% on eligible expenditures. This ITC can be applied against the current year’s income tax or in some cases carried back to a previous tax year or forward to a future tax year. However, some small business corporations may earn an ITC of 35% on eligible expenditures which may be fully refundable in the year.

Eligible expenditures include:

Canadian wages and salaries.
An overhead calculation.
Canadian R&D-related contracts.
Materials.
Payments made to eligible research institutions.

The province of Ontario also provides additional incentives to corporations carrying out SRED activities in the province. Certain small business corporations can earn a refundable Ontario Innovation Tax Credit (OITC) of 8% on eligible expenditures. In addition, the Ontario Research and Development Tax Credit (ORDTC) is available. It is a 3.5% non-refundable tax credit based on eligible expenditures incurred by a corporation in a tax year.

It is important to note that the deadline to file a SRED claim on your tax return is eighteen months after your taxation year.

So If you haven’t considered SRED, it may be worthwhile to do so.

Operating Costs: Ways Companies Can Reduce the Expenses

Posted on October 11, 2023March 7, 2024 by Edixon

Organizations can fulfill their needs and position themselves for success while keeping operating expenses low by outsourcing non-core functions such as information technology, human resources, and financial accounting.

In this article from RSM Canada, they explore some of the ways that companies can reduce operating expenses while still capturing market growth.

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