Overview

The tax credit will help shortline railway corporations to maintain, repair or improve Ontario’s railway track infrastructure.

The credit is a 50% refundable corporate income tax credit for qualifying corporations on eligible capital and labour expenditures incurred for railway track maintenance, repair or improvement.

Expenditures must be incurred on or after May 15, 2025, and before January 1, 2030.

The tax credit is limited to $8,500 per railway track mile in Ontario that the shortline railway owns or leases.

Who qualifies

A qualifying corporation is:

  • a corporation that is:
    • licensed provincially under the Shortline Railways Act (Ontario), or
    • a Class II or III rail carrier as defined under section 8 of the Transportation Information Regulations (Canada) made under the Canada Transportation Act that possesses a Railway Operating Certificate under the Railway Safety Act (Canada)
  • not exempt from Ontario corporate income tax for the taxation year
  • carries on business in Ontario in the taxation year through a permanent establishment in Ontario

Who does not qualify

Class I rail carriers (as defined in the Transportation Information Regulations made under the Canada Transportation Act), urban rail transit systems and industrial railways do not qualify.

Eligible expenditures

Eligible expenditures include eligible capital expenditures and eligible labour expenditures incurred by a qualifying corporation that are attributable to the maintenance, repair or improvement of railway track in Ontario.

Expenditures must be incurred on or after May 15, 2025, and before January 1, 2030.

Eligible capital expenditures

Eligible capital expenditures are expenditures for certain railway-related capital property included in Classes 1, 3 or 13 for capital cost allowance (CCA) purposes.

Class 1

Expenditures for property in CCA Class 1 paragraph (a), (c), (h), (i) or (j) for railway track including signaling equipment and other components (such as rails, ballast, ties and other track material) and certain structures that are ancillary to the railway, such as bridges, culverts and tunnels.

Class 3

Expenditures for property in Class 3 paragraph (d) for railway trestles that are ancillary to the railway.

Class 13

Expenditures for property in Class 13 for 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.

Eligible labour expenditures

Eligible labour expenditures are expenditures which relate to payments made to Ontario-based individuals for maintenance, repair or improvement of railway track performed in Ontario by or on behalf of a qualifying corporation.

“Ontario-based individual” means, in relation to an eligible labour expenditure, an individual who was resident in Ontario at the time that the maintenance, repair or improvement of railway track is performed.

Expenditures that are not eligible

Expenditures not eligible for the tax credit include expenditures:

  • for railway track acquired or leased by the corporation during the taxation year
  • not attributable to the maintenance, repair or improvement of railway track
  • for locomotives, rolling stock or buildings
  • for property that is not ancillary to, or used as part of the maintenance, repair or improvement of railway track

How the tax credit is calculated

A qualifying corporation can claim 50% of eligible expenditures up to a maximum tax credit of $8,500 per railway track mile per year to support the maintenance, repair or improvement of railway track that is leased or owned by a qualifying shortline railway.

For the purposes of the tax credit calculation, track miles must be owned or leased at the beginning of the taxation year. Track miles means the total length of all individual railroad tracks in Ontario which is owned or leased by a qualifying corporation, including mainline tracks, sidings, yard tracks, spurs, passing tracks and any other auxiliary tracks.

Requirement to obtain a Certificate of Eligibility

  • To ensure tax integrity and compliance, a shortline railway corporation must obtain a Certificate of Eligibility from the Ontario Ministry of Transportation that certifies the following:
  • The corporation, throughout the taxation year, is either:
    • a shortline railway company licensed under the Shortline Railways Act, 1995, or
    • a class II or class III rail carrier as defined under section 8 of the Transportation Information Regulations (Canada) made under the Canada Transportation Act which has been issued a Railway Operating Certificate in accordance with the Railway Safety Act (Canada)
  • The number of railway track miles in Ontario owned or leased by the corporation at the beginning of the taxation year.

Get more details on the certification process and the administrative guidelines.

How to claim the tax credit

In order to obtain the tax credit, a corporation must first obtain a Certificate of Eligibility for the taxation year from the Ontario Ministry of Transportation. A Certificate of Eligibility certifies the validity of the provincial shortline railway licence or federal status as a class II or III rail carrier and the track miles owned or leased within Ontario at the beginning of its taxation year.

The Canada Revenue Agency (CRA) administers tax credits on behalf of Ontario. Corporations can claim the tax credit on their T2 corporation income tax return. The corporation must include the required details from the Certificate of Eligibility when filing its return for the taxation year with the CRA.

Read the Taxation Act, 2007 (Ontario) for further details on the requirements and conditions that must be met to claim the tax credit.

Contact us

For the certification process

Contact the Ministry of Transportation, Carrier Sanctions and Investigations Office (CSIO) by email at: csio@ontario.ca.

Get more details on the certification process and the administrative guidelines.

For general tax credit enquiries

Call the CRA at:

  • 1-800-959-5525
  • 1-800-665-0354 for teletypewriter