Ontario is encouraging a state of good repair in the logistics sector with a temporary refundable tax credit for short-line railway operators. The newly released 2025 provincial budget forecasts a $23 million payout over the next three years for the rebate of up to $8,500 per track mile on qualifying maintenance and upgrade expenditures.
“Ontario’s short-line railways play an integral role in connecting shippers to national railway lines by providing critical ‘first and last mile’ service to rail customers. During this period of global economic uncertainty, the government is taking steps to protect businesses that rely on a unified rail network for transporting goods and raw materials to customers,” the budget document states.
Licensed railway operators will be eligible for a refund of 50 per cent of maintenance and improvement costs for track and related bridges and tunnels, including labour and supplies, undertaken between May 15, 2025 and Dec. 31, 2029. This will apply on both leased and owned property.
As well, investors in Ontario industrial facilities can now claim enhanced tax credits for construction and equipment costs. The 2025 budget increases the refund on eligible costs for building and outfitting manufacturing or processing facilities to a maximum of $3 million annually, and expands the pool of potential beneficiaries beyond Canadian-controlled private companies (CCPC).
The refundable tax credit was introduced in the 2023 Ontario budget to provide qualifying CCPCs with a 10 per cent rebate on up to $20 million of qualifying investment per taxation year. That could include capital costs for a building that accommodates manufacturing/processing or for machinery and equipment used for manufacturing/processing purposes.
This refund has now been increased to 15 per cent on up to $20 million of qualifying investment per year that comes into use between May 15, 2025 and Dec. 31, 2029. As well, a 15 per cent non-refundable tax credit has been introduced for foreign controlled companies with a fixed place of business in Ontario that invest in industrial facilities located in the province.
The latter also applies on qualifying expenditures between May 15, 2025 and Dec. 31, 2029, but comes with additional conditions to ensure that benefits stay in Ontario. Recipients would be required to repay either part or the total value of the credit if they sell qualifying assets, convert facilities to a non-industrial use and/or remove equipment or machinery from Ontario within five years of receiving the tax credit.
The enhanced credit is forecast to translate into $1.3 billion in support for claimants over three years. “In the wake of U.S. tariffs and the impacts they may have on Ontario’s manufacturing sector, this additional support would help increase the competitiveness and resilience of the sector, helping to protect and create good-paying manufacturing jobs,” the budget document states.
