Apprenticeship Tax Credits

The federal and Ontario governments are currently offering employers of apprentices tax credits with respect to the apprentices’ wages.  

The federal tax credit is equal to 10% of the eligible salaries and wages paid to the eligible apprentices in respect of their employment. There is a maximum credit for each apprentice of $2,000 per year. The salaries and wages must be paid to an “eligible apprentice” which the Canada Revenue Agency (CRA) defines as someone who is working in a prescribed trade (Red Seal Trade) in the first two years of their apprenticeship contract. The contract must be registered with a federal, provincial or territorial government under an apprenticeship program designed to certify or license individuals in the trade. (source: HYPERLINK “https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4012/t2-corporation-income-tax-guide-chapter-7-page-8-t2-return.html” \l “apprenticeship” T2 Corporation – Income Tax Guide – Chapter 7: Page 7 of the T2 return – Canada.ca) 

The Ontario tax credit is only applicable to employers who have apprentices in apprenticeship programs that commenced on or before November 14, 2017. The Ontario tax credit is not available for apprenticeship programs that commenced on or after November 15, 2017. The ending of the credit does not impact the employer’s ability for the federal credit, nor any apprentice that was registered prior to this date. 

This is a refundable credit equal to 25% (30% for small businesses) of eligible expenditures which includes salaries and wages payable to eligible apprentices to a maximum of $5,000 for those agreements that started between April 24, 2015 and November 15, 2017. The maximum credit over the first 36-month period of apprenticeship is $15,000.

For apprenticeship programs that commenced before April 24, 2015, eligible expenditures incurred after March 26, 2009, and during the first 48 months of the apprenticeship program, qualify for purposes of the tax credit. The tax credit for these apprentices is equal to a specified percentage (35% to 45%) of the eligible expenditures incurred by the corporation for a qualifying apprenticeship. The maximum credit available for each apprentice is $10,000 a year, with a maximum of $40,000 over the first 48 months of the qualifying apprenticeship.

The Ontario government has their own definition of qualifying apprenticeship:

the apprenticeship must be in a qualifying skilled trade approved by the Ministry of Training, Colleges and Universities (Ontario); and

the corporation and the apprentice must be participating in an apprenticeship program in which the training agreement has been registered with specific agencies.

(Source for Ontario credit:  HYPERLINK “https://www.fin.gov.on.ca/en/credit/attc/” https://www.fin.gov.on.ca/en/credit/attc/)

Both of these credits must be included in your income in the year you receive them.  This is generally the year after you apply for them.

Since the Ontario Credit has ended, the Ontario government is in the process of replacing the credit with other incentives. Currently, the Ontario government has a credit called Apprenticeship Completion Employer Bonus which provides $1,000 when the apprentice has completed all required classroom and on-the-job training and received final certification. Qualification for this credit is automatic once the apprentice is hired and trained. Applications will be sent to the employer by the Ontario government once the apprentice has completed the requirements. (Source:  HYPERLINK “https://www.ontario.ca/page/hire-apprentice” https://www.ontario.ca/page/hire-apprentice)

In summary, your company could receive a maximum of $7,000 annually for each qualified apprentice. If you have apprentices and have not applied for the tax credits, your tax returns can be amended to apply for credits from some previous years.  For further information on applying for this credit feel free to contact one of our advisors.