How Ontario’s manufacturing tax credit can drive growth

Ontario’s manufacturing sector is at a crossroads. Rising operational cost, global competition, and the race toward automation demand bold investments. Yet, amid these challenges lies and underused opportunity — the Ontario Made Manufacturing Investment Tax Credit (OMM ITC). Designed to spur local innovation, this refundable tax credit — paired with federal incentives — can transform capital expenditures into strategic advantages.

Explore two case studies demonstrating how businesses are utilizing the OMM ITC to develop sustainable operations and enhance cash flow, thereby securing their position in Ontario's economic future — and why businesses would be wise to act now.

What is the Ontario Made Manufacturing Investment Tax Credit

Ontario’s government created the OMM ITC to capital investment in manufacturing and processing, two important industries for the province’s economy. The goal is simple — keep businesses competitive, strengthen local supply chains, and support job creation.

The program provides a refundable 10 percent tax credit on the purchase of new manufacturing or processing equipment. Unlike non-refundable tax credits (which only reduce taxes owed), a refundable credit means cash back, even if the business’s taxable income is zero.

Businesses can pair this with accelerated depreciation — allowing them to deduct a large portion of their equipment costs from taxable income immediately. The result? Even more tax savings.     

Key eligibility criteria

• Equipment must be owned outright — leased assets do not qualify.
• Businesses must operate in Ontario and be engaged in manufacturing or processing.
• At least 90 percent of operations must involve manufacturing or processing activities.

With uncertainty around whether the credit will be extended beyond 2025, businesses planning capital investments need to react to the incentive sooner than later.

Real-world impact: Two businesses that maximized the credit

It’s one thing to talk about tax incentives, but how do they work in practice is another. Let’s look at two Ontario manufactures that successfully used the OMM ITC to improve cash flow, reinvest in their businesses, and increase efficiency.

Case study one: Food processor in Mississauga

A thriving Indian food manufacturer in Mississauga was a growing fast. Demand for their paneer and ghee products had skyrocketed, but their equipment couldn’t keep up. They needed to scale up, but the cost of new machinery was a major consideration.  

The investment:

• $1.46 million spent on new processing equipment.

The tax incentive:

• OMM ITC refund of $146,300 (applied against taxes).
• Accelerated depreciation deduction of $1,463,000, leading to $388,000 in tax savings.
• Total tax incentives of $534,300 — covering 37 percent of their investment in year one.

How this transformed their business:

• Faster, more efficient production, reducing costs per unit.
• More capacity to meet demand, strengthening customer relationships.
• Reinvestment opportunity — they used the tax savings to purchase even more equipment the following year.

Had they not been aware of the OMM ITC, they might have delayed or downsized their investment — missing out on major opportunities.  

Case study two: Automotive parts manufacturer in Scarborough

With Volkswagen and General Motors expanding their operations in Ontario, one Scarborough-based plastics injection moulding company saw an opportunity. They wanted to increase production capacity for automotive components, positioning themselves as a key supplier in the growing electric vehicle (EV) market.

The investment:

• $5.65 million spent on new manufacturing equipment.

The tax incentive:

• OMM ITC refund of $565,500 (cash applied against taxes).
• Accelerated depreciation deduction of $5,655,000 in year one.
• Used $4,205,000 to reduce taxable income, leading to $1,043,000 in tax savings.
• Carried forward $1,450,000 in non-capital losses to reduce taxes in 2024.
• Total tax incentives in year one, $1,608,500 covering 28 percent of their investment.

How this strengthened their business:

• Higher production capacity, making them a supplier for major auto brands.
• Increased automation and efficiency, lowering long-term costs.
• Positioned for long-term growth in the electric vehicle sector.

Why some businesses are missing out

Despite the clear financial opportunities on the OMM ITC, many manufacturers in Ontario are not utilizing the program. There are several reasons why businesses overlook or miss out on these incentives, but in most cases, a lack of awareness or misinterpretation of the rules is the main barrier.

There’s also the case, where business owners simply don’t know the credit exists or assume it won’t apply to them. Tax incentive programs are constantly changing, and businesses often focus on their day-to-day operations without realizing they may be eligible for government support. If the OMM ITC isn’t actively brought to your attention, you may never factor it onto your decision-making process. This means businesses could be spending hundreds of thousands of dollars more than necessary when acquiring new equipment.

For those who have heard of the credit, complexity often becomes a challenge. Navigating government incentives can be overwhelming, and misunderstandings about eligibility criteria frequently prevent businesses for moving forward. One of the biggest misconceptions is the leased equipment qualifies under the OMM ITC — but is doesn’t. Businesses must own the asset outright to claim the credit. Without proper guidance, businesses may structure their financing in a way that inadvertently disqualifies them from receiving thousands of dollars in tax incentives.

There’s also a tendency of businesses putting off strategic tax planning, assuming they can address it after an investment is made. Unfortunately, waiting too long can lead to missed opportunities. The best way to maximize incentives is to incorporate it early in the purchasing process. By understanding the requirements before making an investment, businesses can structure their purchases in a way that ensures they qualify for the OMM ITC and other available tax benefits.

There’s also a big assumption the credit will be available indefinitely. However, the OMM ITC is currently set to expire in 2025, and there’s no guarantee the Ontario government will extend it. With tax policy subject to political and economic shifts, businesses that wait too long risk losing out entirely.

Maximizing tax incentives for stronger returns

Capital investments drive business growth, but the financial burden can slow momentum. The Ontario Made Manufacturing Investment Tax Credit offers a way to recover a substantial portion of those costs while freeing up cash flow to reinvest in expansion, automation, or hiring. When combined with accelerated depreciation and other tax strategies, the impact multiplies — leading to faster returns and a stronger financial position.

The OMM ITC delivers an immediate cash refund, by covering 10 percent of qualifying equipment purchases. On its own, this offsets a portion of investment costs but pairing it with accelerated depreciation unlocks even greater benefits. This federal incentive allows businesses to deduct the full value of new equipment in the first year, significantly reducing taxable income. With both programs working together, a large percentage of upfront costs return to the business almost immediately — providing greater liquidity, lower financing costs, and more capital to reinvest.

For businesses planning large-scale equipment purchases, the advantages don’t stop there. Additional government programs may apply, depending on the sector, location, and nature of the investment. The right combination of incentives can transform a major capital expenditure into a highly strategic financial decision, where tax savings offset a significant portion of the investment.

With OMM ITC set to expire in 2025, timing plays a critical role. Businesses investing now stand to benefit from the most favourable conditions, maximizing every dollar spent. Taking advantage of these incentives before deadlines shift ensures optimal returns, increased competitiveness, and long-term financial stability. 

Why this matters now

The Ontario Made Manufacturing Investment Tax Credit is an opportunity that allows you to reinvest in your business with fewer financial barriers. Whether you are expanding operations, improving efficiency, or modernizing equipment, this credit helps reduce upfront costs and improve cash flow, making it easier to stay competitive in today’s challenging economic climate.

The program’s future remains uncertain, and the financial benefits are too significant to ignore. By understanding the program’s requirements, structuring purchases strategically, and acting before the 2025 deadline, businesses can utilize the incentive and position themselves for long-term success.

As competition and technology drive industry change, businesses that seize opportunities today will be better prepared for tomorrow. The OMM ITC is one of those opportunities — one that businesses can’t afford to overlook.