Annex: Details of Tax Measures and Other Legislative Initiatives

Overview

This Annex contains detailed information on certain tax measures and other legislative initiatives proposed in this Budget.

Enhancing and Expanding the Ontario Made Manufacturing Investment Tax Credit

The Ontario Made Manufacturing Investment Tax Credit (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 are for capital property included 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 January 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 January 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 January 1, 2030.

Qualifying Corporations

The credit would be available to certain non-CCPCs that make eligible investments in Ontario and that 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 January 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 January 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 that 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
• The 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 that the OMMITC expire, effective January 1, 2030.

Introducing the Ontario Shortline Railway Investment Tax Credit

The government will introduce the new temporary Ontario Shortline Railway Investment Tax Credit. The credit would be a 50 per cent refundable corporate income tax credit for capital and labour expenditures for railway-related maintenance. The credit would be limited to $8,500 per track mile in Ontario and would be available for eligible expenditures made on or after May 15, 2025, and before January 1, 2030.

Qualifying Corporations

The credit would be available to corporations that are licensed provincially under the Shortline Railways Act (Ontario) or federally (Class II & III) under the federal Railway Safety Act that make eligible expenditures and that have a permanent establishment in Ontario. This would exclude urban rail transit systems and industrial railways.

Eligible Investments

Eligible capital investments would be expenditures in Ontario for certain railway-related capital property included in Classes 1, 3 or 13 for CCA purposes, as well as labour expenditures for railway-related maintenance.

Class 1 Property

Eligible investments in Classes 1(a), (c), (h), (i) and (j) by a qualifying corporation in Ontario would include railway-related expenditures for maintenance of railway track and certain structures, such as bridges and tunnels ancillary to the railway. These expenditures would have to be incurred on or after May 15, 2025, and before January 1, 2030.

Class 3 Property

Eligible investments in Class 3(d) by a qualifying corporation in Ontario would include railway-related expenditures for shortline railway trestles. These expenditures would have to be incurred on or after May 15, 2025, and before January 1, 2030.

Class 13 Property

Eligible investments in Class 13 by a qualifying corporation in Ontario would include certain railway-related expenditures on improvements or alterations to leased property that are capital in nature, other than improvements or alterations that are included as part of a building or structure. These expenditures would have to be incurred on or after May 15, 2025, and before January 1, 2030.

Labour Expenditures

Eligible labour expenditures incurred by a qualifying corporation must be directly related to railway track maintenance. This includes expenditures to individuals who are residents of Ontario for work performed in Ontario related to railway track maintenance. These expenditures would have to be incurred on or after May 15, 2025, and before January 1, 2030.

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.

Permanently Reducing Gasoline Tax and Fuel Tax Rates

The Ontario government temporarily cut the Gasoline Tax rate by 5.7 cents per litre and the Fuel (diesel) Tax rate by 5.3 cents per litre on July 1, 2022. The Gasoline Tax and Fuel Tax rates are currently 9 cents per litre. These tax rate reductions are set to end on June 30, 2025, when the tax rates would return to 14.7 cents per litre for gasoline and 14.3 cents per litre for fuel.

To continue to provide relief to households and businesses in Ontario, the government is introducing legislation that would amend the Gasoline Tax Act and the Fuel Tax Act to keep the provincial rates of tax on gasoline and fuel at 9 cents per litre permanently. This change would take effect on July 1, 2025.

Eliminating the Tax on Propane for Use in Licensed Road Vehicles

The government is introducing amendments to the Gasoline Tax Act and Fuel Tax Act and would propose regulatory amendments to eliminate the tax on propane used in licensed road vehicles, effective July 1, 2025.

The use of propane vehicles has steadily declined, and this trend is forecast to continue. Eliminating the tax on propane used in licensed road vehicles is expected to result in tax compliance cost savings, mostly for small businesses.

The Ministry of Finance will provide guidance to current propane tax collectors and businesses on how to ensure a seamless transition to the elimination of the propane tax in the coming weeks.

Proposing an Ontario Fertility Treatment Tax Credit

The government is proposing a new refundable Personal Income Tax credit to help Ontario families with their eligible medical expenses related to fertility treatment, starting with the 2025 taxation year. The Ontario Fertility Treatment Tax Credit would provide Ontario families with support of 25 per cent on eligible expenses up to $20,000, for a maximum tax credit of $5,000 per year. Eligible Ontario residents could apply for this credit when they file their Income Tax and Benefit Returns, even if they do not owe any Personal Income Tax.

The proposed credit would be built on the eligible medical expenses claimed for the existing Medical Expense Tax Credit (METC) related to fertility treatment and preservation, as well as to surrogacy. It could be claimed in addition to the non-refundable federal and Ontario METCs for the same eligible expenses.

Eligible fertility expenses would be those that are paid by the individual or the individual’s spouse or common-law partner for the purposes of conceiving a child, starting in 2025. To be eligible for the credit, expenses must not have been reimbursed, or will not be reimbursed (e.g., through insurance). If a part of the expenses has been or will be reimbursed, the unreimbursed portion may be eligible. Eligible expenses would also include certain medical expenses paid to or on behalf of a surrogate mother for the purposes of the tax filer becoming a parent.

The types of eligible fertility-related expenses would generally be the same as those claimed for the Ontario METC, as long as they are in respect of goods or services provided entirely in Canada. Eligible expenses could include:

• Amounts paid to a medical practitioner or a public or private hospital to conceive a child;
• Fertility medication prescribed by a physician;
• Expenses paid to a medical practitioner or a fertility clinic, with respect to reproductive technology processes such as artificial insemination or in vitro fertilization; these expenses may include costs for egg and embryo freezing (including storage);
• Amounts paid to a fertility clinic or donor bank in Canada as a fee to obtain sperm or ova to enable the conception of a child by the individual, their spouse or common-law partner; or a surrogate mother on behalf of the individual;
• Fertility clinic fees;
• Amount paid for intrauterine insemination; and
• Travel expenses required as part of the fertility treatment and that meet certain conditions.

For detailed rules, including which medical expenses are eligible, tax filers can consult relevant Canada Revenue Agency publications and federal and provincial legislation.

Enhancing Access to Property Assessment Information

As part of the ongoing review of the property assessment and taxation system, the government has been exploring opportunities to enhance access to property assessment information. Based on this work, the following steps are being taken:

• Introducing legislation that would enable the Municipal Property Assessment Corporation (MPAC) to deliver assessment notices to property owners electronically rather than only by paper mail starting in 2026; and
• Introducing legislation that would create regulatory authority to facilitate expanded municipal uses of MPAC’s property assessment information, such as for research or operational needs.

In addition, potential tools are being evaluated to help municipalities manage their assessment base. Work is also underway with MPAC on plans to enable them to provide centralized online access to assessment roll information rather than requiring on-site viewing in municipal offices.

Delivering Simpler, More Digital Tax Services for Business

In the 2023 Budget, the government outlined plans to improve and simplify Ontario's tax administration system with the aim of modernizing and enhancing the client experience, and simplifying interactions that take place through digital channels. The government is also exploring ways to ensure tax programs are fair and effective, encourage voluntary compliance, and keep the cost of compliance down for businesses. Progress is already being made to identify ways to reduce administrative burdens faced by client groups — for example, by the proposal included in this Budget to eliminate the propane tax. Additional opportunities are being explored through ongoing reviews of tax programs with a view towards improving administrative effectiveness and helping keep costs down.

In addition, the government continues to make progress delivering simple and secure digital services to help Ontario businesses meet their tax responsibilities. Ongoing upgrades to digital services enable Ontario businesses to make secure payments, file documents easily, and manage tax accounts from any device. Improvements to online information about Ontario’s tax programs and services ensures people can find and understand the information they need.

Investment in digital tools and technology simplifies tax administration processes and saves Ontario businesses time and money. The government will continue to expand digital service delivery and invest in more online options for processes that currently require paper documents, mail delivery or in-person visits.

Supporting the Federal Harmonized Sales Tax Holiday

The Ontario government was pleased to work with the federal government on the temporary Harmonized Sales Tax (HST) holiday over the period of December 14, 2024, to February 15, 2025. Ontario provided $885 million to support the temporary tax holiday, working with the federal government to provide relief from the provincial portion of HST on various items.

Implementing Changes to Alcohol Taxes, Mark-Ups and Fees

In 2024, the government began a review of the taxes, mark-ups and fees on alcoholic beverages to promote a more competitive and modernized alcohol marketplace. Ontario will be implementing several changes in the near term as part of continuing work to support a modernized and competitive alcohol marketplace.

Cutting the Spirits Basic Tax Rate

Spirits taxes apply to spirits made by Ontario spirit manufacturers (distillers) and sold from a distillery retail store in Ontario. Spirits taxes include the spirits basic tax, the volume tax, and the environmental tax on non-refillable containers in which the spirits are sold, as applicable.

The government is introducing legislation that would, if enacted, amend the Liquor Tax Act, 1996 to reduce the spirits basic tax from 61.5 per cent to 30.75 per cent, effective August 1, 2025.

Cutting the Basic Tax and Liquor Control Board of Ontario Mark‑Up Rates for Beer Made by Microbrewers

Taxes on beer and the respective Liquor Control Board of Ontario (LCBO) mark-ups on beer are made up of the beer basic tax/mark-up, the beer volume tax/levy, and the environmental tax/levy on non-refillable containers in which the beer is sold, as applicable.

Beer made by microbrewers benefits from a basic beer tax/mark-up rate that is lower than the basic beer tax/mark-up rate applicable to beer made by other beer manufacturers. Manufacturers may qualify as microbrewers for a sales year if they satisfy certain conditions, including that their worldwide production (including the worldwide production of their affiliates) for the past calendar year is not more than 49,000 hectolitres.

The government is introducing legislation that would amend the Liquor Tax Act, 1996 to further reduce the beer basic tax rates applicable to beer made by Ontario microbrewers. The rates would be reduced from 35.96 cents per litre to 17.98 cents per litre for draft beer and from 39.75 cents per litre to 19.88 cents per litre for non-draft beer, effective August 1, 2025.

To facilitate compliance, a transitional rule would provide that if the beer sold to a purchaser was received by a collector before August 1, 2025 and then sold to the purchaser on or after August 1, 2025, the basic tax payable by the purchaser in respect of the beer would be calculated at the basic tax rate in effect on July 31, 2025.

The Minister would issue a directive requiring the LCBO to reduce its mark-ups to match the reductions in the tax rates.

Increasing Flexibility and Certainty for Microbrewers

To qualify as a microbrewer for a given sales year under the current rules, a brewer must not have been a party to an agreement or other arrangement in the preceding production year through which another brewer that is not a microbrewer makes beer for the microbrewer. As well, a brewer’s annual worldwide production of beer in the preceding production year must not have been more than 49,000 hectolitres.

With a view to increasing flexibility and efficiency for microbrewers, the government is proposing legislation that would permit microbrewers that make commercial quantities of beer for sale in Ontario at a qualifying beer manufacturing facility in Ontario, to enter into a contract with another brewer that is not a microbrewer for the production of beer for the microbrewer, while retaining its status as a microbrewer. The Minister could, by regulation, prescribe other circumstances in which microbrewers could enter into production contracts with non-microbrewers.

A qualifying beer manufacturing facility would be a fixed place of business of the corporation in Ontario, where the corporation manufactures for retail sale, in the production year, commercial quantities of beer.

The change would come into force on Royal Assent.

The proposed legislation would also implement a new five-year-average rule to create more certainty for small brewers. It is proposed that to qualify as a microbrewer, the lesser of a brewer’s average annual worldwide production of beer in the five preceding production years or its annual worldwide production in the prior year must not be more than 49,000 hectolitres. This change would come into force on March 2, 2026.

Enhancing the Small Beer Manufacturers’ Tax Credit

The Taxation Act, 2007 provides a refundable corporate tax credit for small beer manufacturers (SBMTC). Beer manufacturers with permanent establishments in Ontario may qualify in respect of eligible sales of draft and non‑draft beer sold to purchasers in Ontario during a sales year, if they meet certain criteria, including limits on production.

Amendments would be made to reflect the proposed new beer basic tax rates for microbrewers, providing enhanced relief to qualifying corporations in respect of eligible sales occurring on or after August 1, 2025.

As well, amendments would be made to mirror the proposals for the new five-year-average rule and new contracting rules under the Liquor Tax Act, 1996. See the sections “Cutting the Basic Tax and Liquor Control Board of Ontario Mark-Up Rates for Beer Made by Microbrewers,” as well as “Increasing Flexibility and Certainty for Microbrewers” for information on the related Liquor Tax Act, 1996 proposals.

Cutting the Liquor Control Board of Ontario Mark-Up Rate for Cider

The basic mark-up rate applied by the LCBO to cider would be reduced from 60.6 per cent to 32.0 per cent, effective August 1, 2025.

Cutting the Liquor Control Board of Ontario Mark-Up Rates for Spirit- and Wine-Based Ready-to-Drink Beverages

The basic mark-up rates applied by the LCBO to certain wine-based and spirit-based ready-to-drink beverages (RTDs) would be reduced, effective August 1, 2025. The mark-up rates applicable to wine-based RTDs that do not have an alcohol-by-volume (ABV) content of greater than 7.1 per cent would be reduced from 60.6/64.6 per cent to 48 per cent, and the mark-up rates applicable to spirit-based RTDs that do not have an ABV content of greater than 7.1 per cent would be reduced from 68.5/96.7 per cent to 48 per cent.

Creating an Alcohol Refreshment Beverage Category

The government is proposing to amend the Liquor Tax Act, 1996 to authorize the Minister of Finance to make regulations defining a new category of “alcohol refreshment beverages” and prescribing tax rates for it. This new category would include a ready-to-consume cooler, hard seltzer or other premixed cocktail made from spirits, wine, beer or fermented sugar, or from any combination of the four that does not have an ABV content of greater than 7.1 per cent, unless specifically excluded in the regulations.

The new category may also include other beverages that are otherwise taxable under the Act, provided they do not have an ABV content of greater than 7.1 per cent and they meet other conditions that may be prescribed by the Minister.

The government intends to seek stakeholder feedback on the proposed regulations through Ontario’s Regulatory Registry. The new rules would be implemented following consideration of the submissions received.

Summary of Measures

Technical Amendments

Amendments are being proposed to various statutes administered by the Ontario Minister of Finance, or other statutes, to improve administrative effectiveness or enforcement, maintain the integrity and equity of Ontario’s tax and revenue collections system, or enhance legislative clarity or regulatory flexibility to preserve policy intent.

Proposed legislative amendments include:

• Amendments to the Employer Health Tax Act to authorize notices of assessment to be sent by regular mail and electronically.
• Amendments to the Employer Health Tax Act to repeal spent provisions and to provide clarity.
• Amendments to the National Capital Children’s Oncology Care Inc. Act to update the property description in the Act to ensure the continuation of the property tax exemption for the expanded building of the Ronald McDonald House Charities Ottawa.
• Amendments to the Ontario Cannabis Retail Corporation Act, 2017 to ensure ministerial oversight over bylaws of the Ontario Cannabis Store.
• Amendments to the Ontario Cannabis Retail Corporation Act, 2017 to provide the Minister with authority to direct payments of the Ontario Cannabis Store net profits into the Consolidated Revenue Fund. 
• Amendments to the Financial Administration Act to add bond forwards to the list of authorized financial instruments under the Minister of Finance’s investment powers.

Other Legislative Initiatives

Additional proposed legislative amendments include:

• Amendments to the Historical Parks Act to establish a Designated Purpose Account to support historical parks operations and to enable regulations to modify and clarify the rules applicable to historical parks.
• Amendments to the Highway Traffic Act to require municipalities to make Automated Speed Enforcement and Red-Light Camera locations more transparent and to focus their traffic cameras on road safety objectives.
• A proposed new Act to provide for the designation of former members of the Executive Council as Honorary Members of the Executive Council.