Summary: Ontario Budget 2025

ON Budget 2025 introduces new business and personal tax measures and proposes several changes to various sales and excise tax measures, but makes no changes to the personal or corporate tax rates. In addition, the budget reaffirms the provincial government’s intention to protect workers, businesses, and communities in Ontario from the impact of US tariffs, promote affordability, and encourage strategic investment.  

The deficit for the 2024-25 fiscal year is projected to be $6 billion, compared to a projected $9.8 billion deficit in the previous budget. Ontario anticipates balancing the budget by 2027-28.

Fiscal projections for the next three years are as follows:

Business tax measures

Corporate tax rates

There are no changes to the corporate tax rates. 

Combined federal and Ontario corporate tax rates

Interest and penalty relief on certain Ontario taxes

The budget provides a six-month interest and penalty free period for qualifying businesses from certain taxes administered by Ontario. From April 1, 2025 to October 1, 2025, all Ontario businesses that pay taxes under 10 of Ontario’s business-focused tax programs [1] can defer payments for taxes owed without incurring interest and penalties. Tax returns must continue to be filed on time during this period.

Ontario Made Manufacturing Investment Tax Credit

To further support investment in Ontario’s manufacturing sector, the Ontario Made Manufacturing Investment Tax Credit (OMMITC) rate will be temporarily increased to 15% (from 10%) for eligible corporations on qualifying investments in certain manufacturing and processing (M&P) buildings, machinery, and equipment. The enhanced credit would be available for eligible expenditures up to a limit of $20 million/year (shared among an associated group and prorated for short tax years). This would increase the maximum credit available to $3 million/year (from $2 million/year). 

The eligibility criteria are also expanded to make this credit available to certain non-Canadian controlled private corporations (non-CCPCs), including publicly traded companies. However, the OMMITC would only be available to qualifying non-CCPCs on a non-refundable basis (with a carry forward period of up to 10 taxation years for any unused non-refundable credits). Currently, the credit is only available to certain CCPCs with a permanent establishment in Ontario and is refundable. [1]

If enacted, the changes will be effective for qualifying M&P buildings, machinery, and equipment purchased and made available for use on or after May 15, 2025 and before January 1, 2030. 

As well, all or a portion of the OMMITC must now be repaid if the eligible M&P property is sold, no longer used for M&P use, or is removed from Ontario within five years of being acquired. This measure will apply to property affected by such actions on or after May 15, 2025.

The Ontario government is required to review the effectiveness of the OMMITC every three years and is proposing that the OMMITC expire effective January 1, 2030.

Ontario Shortline Railway Investment Tax Credit

The Ontario Shortline Railway Investment Tax Credit is a new 50% refundable corporate income tax credit for qualifying capital and labour expenditures for railway related maintenance and repairs. The credit is limited to $8,500 per track mile/year and would be available to qualifying corporations for eligible expenditures made on or after May 15, 2025 and before January 1, 2030. 

Enhancing the Small Beer Manufacturers’ Tax Credit

The Small Beer Manufacturers’ Tax Credit, a refundable corporate tax credit, will be amended to reflect the proposed new beer basic tax rates for microbrewers, providing enhanced relief to qualifying corporations. The conditions required to meet the definition of a small beer manufacturer will also be expanded, providing increased access to the credit. This change will apply to eligible sales on or after August 1, 2025. 

Personal tax measures

Personal income tax rates

There are no changes to personal rates. The personal tax brackets and the respective marginal tax rates for 2025 are as follows:

The top combined federal and Ontario marginal tax rates for 2025 are as follows:

Ontario Fertility Treatment Tax Credit

The Ontario Fertility Treatment Tax Credit is a new refundable personal income tax credit available to qualifying Ontario residents. The credit covers 25% of eligible fertility treatment expenses paid by the individual or their spouse or common-law partner, up to a maximum of $20,000, for a maximum credit of $5,000/year. The proposed credit is available for eligible fertility treatments provided within Canada on or after January 1, 2025, and can be claimed in addition to existing federal and Ontario medical expense tax credits. 

Sales and excise tax measures

Alcohol taxes, mark-ups and fees

Several changes were announced, specifically:

• The spirits basic tax will be reduced to 30.75% (from 61.5%) for spirits distilled in Ontario and sold from a distillery retail store in Ontario. This change will be effective August 1, 2025.
• The beer basic tax will be reduced to 17.98 cents/litre (from 35.96 cents/litre) for draft beer and 19.88 cents/litre (from 39.75 cents/litre) for non-draft beer made by Ontario microbrewers.This change will be effective August 1, 2025 (subject to certain transitional rules).
• The conditions required to meet the definition of a microbrewer are being expanded with certain changes effective when the legislated changes receive royal assent, and additional changes effective March 2, 2026.
• The basic mark-up rate on cider will be reduced to 32% (from 60.6%) effective August 1, 2025.
• The basic mark-up rate on ready-to-drink beverages (RTDs) with alcohol-by-volume (ABV) of 7.1% or less will be reduced to 48% (from 60.6% / 64.6%) for wine-based RTDs and reduced to 48% (from 68.5 / 96.7%) for spirit-based RTDs. The reductions are effective August 1, 2025. 

Gasoline Tax Act and Fuel Tax Act changes

The gasoline and fuel taxes will remain at 9 cents/litre permanently. Previously, the gasoline tax had been temporarily reduced from 14.70 cents/litre, and the fuel tax from 14.30 cents/litre. These temporary reductions were scheduled to end June 30, 2025. 

The tax on propane used in licensed road vehicles will be eliminated effective July 1, 2025.

Harmonized Sales Tax 

There are no changes to the current 13% Harmonized Sales Tax (HST) rate, which is composed of 5% federal and 8% provincial components.

Other notable measures

Tolls will be permanently removed from the provincially owned section of Highway 407 East, spanning from Brock Road to Highway 35/115, effective June 1, 2025. 

Have questions? Let’s talk. Contact your local advisor or reach out to us here. 

 Visit our Budget 2025 hub to learn more about all federal and provincial budgets.

References:

^{[1] These tax programs include: Employer Health Tax, Insurance Premium Tax, Gasoline Tax, Fuel Tax, Mining Tax, Tobacco Tax, International Fuel Tax Agreement, Beer, Wine & Spirits Tax, the Retail Sales Tax on Insurance Contracts and Benefits Plans and the Race Tracks Tax.}   

Disclaimer

^{The information contained herein is general in nature and is based on proposals that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice or an opinion provided by Doane Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, specific circumstances or needs and may require consideration of other factors not described herein.}