The Ontario Made Manufacturing Investment Tax Credit

The Ontario budget was released on May 15, 2025. In that budget, there is an interesting enhancement to the Ontario Made Manufacturing Investment Tax Credit (OMMITC). The details are outlined below, including a chart summarizing the changes.

The OMMITC is a 10 per cent refundable corporate income tax credit available to Canadian‑controlled private corporations (CCPCs) that make eligible investments in Ontario. Eligible investments include expenditures for constructing, renovating or acquiring buildings used for manufacturing or processing, as well as machinery and equipment used in the manufacturing or processing of goods in Ontario.

The credit is available for eligible expenditures up to a limit of $20 million in a taxation year with respect to capital investments in buildings that became available for use on or after March 23, 2023 and for machinery and equipment used in manufacturing or processing that were acquired and became available for use on or after March 23, 2023.

Eligible expenditures include capital property in Class 1 or Class 53 for capital cost allowance (CCA) purposes. After 2025, eligible investments would include expenditures for machinery and equipment in Class 43(a) for CCA purposes used in the manufacturing or processing of goods for sale or lease.

Enhancement of the OMMITC

Ontario is proposing to temporarily increase the OMMITC rate. The proposed enhancement would allow qualifying corporations to claim a 15 per cent credit instead of the current 10 per cent.

The enhanced credit would be available for eligible expenditures up to a limit of $20 million in a taxation year with respect to specific capital investments. Machinery and equipment used in manufacturing or processing would need to be acquired and become available for use in a qualifying corporation’s taxation year and in the period beginning on May 15, 2025 and ending before Jan. 1, 2030. Capital investments in buildings used in manufacturing or processing would need to become available for use in a qualifying corporation’s taxation year and in the period beginning on May 15, 2025 and ending before Jan. 1, 2030.

“Available for use” refers to the rules set out in the federal Income Tax Act that determine the taxation year in which a taxpayer can start to claim CCA for a depreciable property.

The relevant legislation to implement this measure will be included in a bill introduced during fall 2025, following the release of the 2025 Ontario Economic Outlook and Fiscal Review.

Expansion of the OMMITC

The government is proposing to expand support for Ontario’s manufacturing industry by providing a non‑refundable version of the OMMITC that would be available to qualifying corporations that are not CCPCs.

The proposed OMMITC expansion would be a new 15 per cent non‑refundable corporate income tax credit for capital investments in buildings, machinery and equipment used in manufacturing or processing in Ontario. The credit would be temporary and available for eligible investments made on or after May 15, 2025 and before Jan. 1, 2030.

Qualifying corporations

The credit would be available to certain non‑CCPCs that make eligible investments in Ontario and have a permanent establishment in Ontario. For the purposes of this credit, a permanent establishment means a fixed place of business, including an office, a factory or a workshop.

Eligible investments

Eligible investments would be expenditures for certain capital property included in Class 1 or Class 53 ⁠–⁠ or Class 43(a) after 2025 ⁠–⁠ for CCA purposes.

Class 1 property ⁠–⁠ Eligible investments in Class 1 would include expenditures for constructing, renovating or acquiring buildings used for manufacturing or processing goods in Ontario that become available for use on or after May 15, 2025 and before Jan. 1, 2030. To qualify as a building used for manufacturing or processing, 90 per cent of the floor space of the building must be used at the end of the corporation’s taxation year for manufacturing or processing in Ontario, and the building must be eligible for the additional six per cent CCA permitted under the federal Income Tax Act.

Class 53 property ⁠–⁠ Eligible investments in Class 53 would include expenditures for machinery and equipment used in the manufacturing or processing of goods in Ontario. The machinery and equipment would have to be acquired and become available for use on or after May 15, 2025 and before Jan. 1, 2030. Note: after 2025, eligible investments would include expenditures for machinery and equipment included in Class 43(a) used in the manufacturing or processing of goods for sale or lease.

“Available for use” refers to the rules set out in the federal Income Tax Act that determine the taxation year in which a taxpayer can start to claim CCA for a depreciable property.

Carry forward

The credit would include a carry forward provision to allow any unused non‑refundable credits to be applied against taxes payable in up to 10 subsequent taxation years.

Eligible investment limit

The credit would be available for eligible investments up to a limit of $20 million in a taxation year and would be pro‑rated for a short taxation year. An associated group of corporations would be subject to the $20‑million limit. The relevant legislation to implement this measure will be included in a bill introduced during fall 2025, following the release of the 2025 Ontario Economic Outlook and Fiscal Review.

Enhancing the integrity and effectiveness of the OMMITC

The government is also proposing amendments to the OMMITC to enhance its integrity and effectiveness. The amendments would require repayment of the credit in specified circumstances. This enhancement would help target this tax credit and ensure the OMMITC continues to support eligible investments made in Ontario.

A provision to recapture support would apply where eligible capital property for which the credit was claimed is sold, converted to non‑manufacturing or processing use, or removed from Ontario within five years. The repayment amount would be the lesser of the total value of the credit or credit amount relative to the value of the property at the relevant time. This would ensure that if a corporation purchased an asset and then, within five years, sold, converted or removed it from Ontario, a portion of the OMMITC would be recaptured based on the value of the asset at the time and its original cost.

The amendment would apply to eligible capital property sold, converted to non‑manufacturing or processing use or removed from Ontario on or after May 15, 2025. The relevant legislation to implement this measure will be included in a bill that accompanies this budget.

Reviewing the effectiveness of the Ontario Made Manufacturing Investment Tax Credit

The government is required to undertake a review of the OMMITC every three years. As part of these reviews, the government will evaluate the credit for effectiveness, compliance burden and administrative costs. Subject to the results of the reviews and to target support for investments during this period of trade uncertainty, the government is proposing the OMMITC expire, effective Jan. 1, 2030.

If you have any questions or would like to learn how your business can benefit from the enhanced OMMITC, please contact us.

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