Skip to content Ontario. Notice to the reader: This publication is provided as a guide only. There is no lifetime limit to the amount of taxable stock option benefits and taxable capital gains that would qualify for a refund. Determination of whether the criteria are met, other than the determination of eligible employee see below , is made by the individual. Residents of Ontario who cease to be residents of the province during the year are not eligible for the credit for that year.
An individual who dies in the year is eligible for the credit in the year of death, if he or she was a resident of Ontario on the day of death. Subsection 1 of the federal ITA generally defines scientific research and experimental development to mean systematic investigation or search carried out in a field of science or technology by means of experiment or analysis.
Further details of the definition are set out in the federal ITA. An employer is an eligible employer at the time a stock option agreement is entered into if the employer:. For short taxation years, the expenditure amounts are calculated by multiplying the expenditures by the ratio of the number of days in a full year to the number of days in the short year. Associated, in respect of a corporation and another corporation, has the meaning given to that expression by subsection 1 of the federal ITA.
Total revenue of a corporation is essentially the gross revenue of the corporation. To avoid double counting when total revenue of a group of entities is considered, inter-company transactions affecting gross revenue are excluded. Eligible expenditures are those that are incurred by an employer in directly undertaking scientific research and experimental development that qualify for the Ontario research and development super allowance under subsection 12 1 of the Corporations Tax Act.
A partner's proportionate share of total revenue and eligible expenditures is nil if the partner is a specified member of the partnership as defined under subsection 1 of the federal ITA. A stock option agreement is an agreement whereby a corporation agrees to sell or issue shares of the corporation, or of a corporation with which it does not deal at arm's length, to an employee of the corporation or of a corporation with which it does not deal at arm's length.
The term eligible stock options , as used in this bulletin, refers to rights to acquire shares under an eligible stock option agreement. The information to be provided on the certificates is based on the eligible employer's taxation year. Both notices are filed on a calendar year basis. The eligible employer is not required to report to the ministry deferred stock option benefits that are brought into income of the employees when the employees sell the shares that were acquired through exercising eligible stock options.
An eligible employer must notify the ministry, in writing, if there are any changes to the information provided on the Certificate of Eligible Stock Option Agreements or Notice of Benefit forms on or before the last day of the second month following the month in which the employer becomes aware that the information has changed.
The ministry will issue the refund cheques. You must file your application no later than September 30 of the second calendar year beginning after the tax year to which the refund relates. Once the application is processed, you will be sent a Notice of Entitlement showing the refund amount if any and how the refund is calculated. If you do not agree with the Notice of Entitlement you have the right to file a Notice of Objection with the ministry within 90 days from the date of the notice.
Instructions for filing a Notice of Objection are included on the Notice of Entitlement. The amount of the tax refund is the difference between the Ontario tax you paid and your adjusted tax amount after applying the credit, plus any applicable interest. The adjusted tax amount is the amount of Ontario personal income tax that you would have had to pay if you could have made the following deduction on your income tax return.
To determine the amount of the ORESO credit, the amount calculated above is deducted from taxable income to arrive at your adjusted taxable income. Your adjusted tax amount is determined using the Ontario tax calculations on Form ON, Ontario Tax and your adjusted taxable income.
The calculation of the Adjusted Tax Amount is only for purposes of calculating a tax refund under the ORESO credit and will not increase or decrease your other Ontario tax credits and deductions as calculated on your income tax and benefit return. Where you have an employee stock option benefit as well as a capital loss from the disposition of shares acquired by exercising rights under an eligible stock option agreement, the deduction that can be claimed in respect of the stock option benefit is not reduced by the capital loss.
If you have capital gains from the disposition of shares acquired by exercising rights under an eligible stock option agreement and other capital gains as well as an allowable capital loss, the allowable capital loss is deemed to first reduce the other capital gains. For the and subsequent taxation years, compound daily interest on a tax refund will be paid starting on the day that is the later of:.
If an individual owes any amounts to the Province of Ontario, all or part of the Ontario tax refund and interest may be applied to that liability instead of being paid to the individual. Individuals who receive a tax refund and interest that they are not entitled to, must repay the amount. Interest will be payable on any overpayment starting from the date the refund was issued. The rules discussed in this bulletin are contained in sections 8. To obtain the most current version of this document, visit ontario.
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