Ontario 2025 Budget Highlights

Ontario Minister of Finance Peter Bethlenfalvy tabled the province’s 2025 budget on Thursday May 15, 2025. This year’s budget — titled A Plan to Protect Ontario — aims to protect workers, businesses, and communities from the economic uncertainty caused by U.S. tariffs. The budget includes measures to help build a more resilient and self-reliant economy, while investing in health care, education and other critical services.  

No changes to corporate or personal income tax rates were announced. 

Corporate income tax measures 

Ontario Made Manufacturing Investment Tax Credit 

The budget includes the previously announced enhancements to this refundable tax credit, increasing the tax credit from 10 percent to 15 percent for Canadian-controlled private corporations (CCPC). Eligible investments must be made on or after May 15, 2025, and before 2030, up to a limit of $20 million per associated group in a taxation year. This refundable tax credit was originally introduced in 2023 to lower costs for businesses that invest in buildings, machinery, and equipment used for manufacturing and processing in Ontario.  

Further, non-Canadian-controlled private corporations will become eligible for a non-refundable tax credit of 15 for eligible investments made on or after May 15, 2025, and before 2030. This credit would include a carry forward provision to allow any unused non-refundable credits to be applied against taxes payable in up to 10 subsequent taxation years. 

Repayment of all or a portion of this credit would be required in specified circumstances, such as where eligible capital property was sold, converted to non-manufacturing or processing use, or removed from Ontario. 

Ontario Shortline Railway Investment Tax Credit  

The budget introduces a new 50 percent refundable tax credit for capital and labour expenditures made on or after May 15, 2025 and before 2030 for railway-related maintenance in Ontario. This temporary tax credit would provide up to $8,500 per track mile per year to support improvements in railway tracks, signaling equipment, trestles, bridges, culverts, and tunnels that are leased or owned by a qualifying shortline railway. 

This temporary credit would be available to corporations that are licensed provincially under the Shortline Railways Act (Ontario) or federally (Class II & III) under the federal Railway Safety Act and would exclude urban rail transit systems and industrial railways.  

Deferral of select Ontario administered taxes 

As previously announced, Ontario is providing a six-month interest and penalty-free period to businesses for payments of certain Ontario administered taxes, including Employer Health Tax, Gasoline Tax, Fuel Tax, Beer, wine and spirits tax, and others. This period begins on April 1, 2025, and ends on October 1, 2025. Businesses are still required to file applicable returns for these taxes on time. 

Personal income tax measures 

Ontario Fertility Treatment Tax Credit 

The budget introduces a new refundable personal income tax credit for eligible medical expenses related to fertility treatment, effective for the 2025 taxation year. The tax credit is proposed to be 25 percent on eligible expenses up to $20,000 for a maximum tax credit of $5,000 per year.  

Eligible fertility-related expenses would generally be the same as those claimed for the Ontario medical expense tax credit — provided they are in respect of goods or services provided entirely in Canada. This new refundable tax credit could be claimed in addition to the non-refundable federal and Ontario medical expense tax credits already available for the same eligible expenses.  

Other tax measures 

Permanently cutting gas tax and fuel tax rates 

The budget includes the previously announced plan to permanently cut the gasoline and fuel tax rates, keeping the provincial rates of tax at nine cents per litre. Ontario temporarily cut the gasoline tax rate by 5.7 cents per litre and the fuel (diesel) tax rate by 5.3 cents per litre on July 1, 2022, and has extended the cuts four times. 

Elimination of tax on propane for licensed road vehicles 

The budget proposes to eliminate the tax on propane used in licensed road vehicles effective July 1, 2025, to reduce tax compliance costs for small businesses. The government will provide further guidance on this transition in the coming weeks.  

Changes to alcohol taxes, mark-ups and fees 

The budget announced several changes to support a modernized and competitive alcohol market. Those changes include: 

Cutting the spirits basic tax rate 

The budget proposes to reduce the spirits basic tax from 61.5 percent to 30.75 percent effective August 1, 2025. Spirits taxes include the spirits basic tax, the volume tax, and the environmental tax on non-refillable containers in which the spirits are sold, as applicable. 

Cutting the basic tax and mark-up rates for beer made by microbrewers 

The budget proposes to further reduce the beer basic tax rates applicable to beer made by Ontario microbrewers. The rates would be reduced from 35.96 cents per litre to 17.98 cents per litre for draft beer and from 39.75 cents per litre to 19.88 cents per litre for non-draft beer effective August 1, 2025. Certain transitional rules are provided to facilitate compliance.  

Beer made by microbrewers already benefits from a basic beer tax/mark-up rate that is lower than the basic beer tax/mark-up rate applicable to beer made by other beer manufacturers. Manufacturers may qualify as microbrewers for a sales year if they satisfy certain conditions, including that their worldwide production for the past calendar year is not more than 49,000 hectolitres. 

Increasing flexibility and certainty for microbrewers 

The budget announced changes that would permit microbrewers to enter into a contract with another brewer that is not a microbrewer for the production of beer for the microbrewer, while retaining its status as a microbrewer.  

Qualifying criteria include:  

• The microbrewer makes commercial quantities of beer for sale in Ontario at a qualifying beer manufacturing facility in Ontario 

• The manufacturing facility would be a fixed place of business of the corporation in Ontario, where the corporation manufactures commercial quantities of beer for retail sale in the production year.  

The change would come into force on Royal Assent.  

The budget also introduces a new five-year-average rule to create more certainty for small brewers. Specifically, to qualify as a microbrewer, the lesser of a brewer’s average annual worldwide production of beer in the five preceding production years or its annual worldwide production in the prior year must not be more than 49,000 hectolitres. This change would come into force on March 2, 2026. 

Enhancing the small beer manufacturers’ tax credit 

The budget proposes amendments to reflect the proposed new beer basic tax rates for microbrewers, providing enhanced relief to qualifying corporations. These would be effective for eligible sales occurring on or after August 1, 2025. Further, amendments would be made to mirror the proposals for the new five-year-average rule and new contracting rules discussed above.  

Cutting the mark-up rate for cider 

The basic mark-up rate applied by the LCBO to cider would be reduced from 60.6 percent to 32.0 percent, effective August 1, 2025. 

Cutting the mark-up rates for spirit- and wine-based ready-to-drink beverages

The budget proposes to reduce the basic mark-up rates applied by the LCBO to certain wine-based and spirit-based ready-to-drink beverages (RTDs), effective August 1, 2025.  

Specifically, the mark-up rates for wine-based RTDs with an alcohol-by-volume (ABV) content of not more than 7.1 percent would be reduced from 60.6/64.6 per cent to 48 percent, and the mark-up rates applicable to spirit-based RTDs with an ABV content not more than 7.1 percent would be reduced from 68.5/96.7 percent to 48 percent. 

Creating a new alcohol refreshment beverage category 

The government is proposing to define a new category of “alcohol refreshment beverages” and prescribing tax rates for it. These would include, for example, ready-to-consume coolers, hard seltzers, or other premixed cocktail made from spirits, wine, beer or fermented sugar with an ABV content of no greater than 7.1 per cent.  

The government intends to seek stakeholder feedback on the proposed regulations through Ontario’s Regulatory Registry. The new rules would be implemented following consideration of the submissions received. 

Other administrative measures 

Enhancing access to property assessment information 

Based on the results of a review of the property assessment and taxation system, the budget announces the following measures: 

• Introducing legislation that would allow assessment notices to be delivered to property owners electronically rather than only by paper mail starting in 2026; and  

• Introducing legislation that would create regulatory authority for expanded municipal uses of property assessment information. In addition, potential tools are being evaluated to help municipalities manage their assessment base, along with plans to enable centralized online access to assessment roll information rather than requiring on-site viewing in municipal offices. 

Delivering simpler/more digital tax services for business 

The budget announces continued investment in digital tools and technology to help simplify tax administration processes, such as expanding digital service delivery and investing in more online options for processes that currently require paper documents, mail delivery or in-person visits. 

Full details of the 2025 Ontario budget can be found here.