The SR&ED incentive program encourages Canadian businesses of all sizes and in all sectors to conduct R&D in Canada that can lead to new, improved or technologically advanced products or processes. The federal and provincial tax credits combined range from 15% non-refundable to 54.5% refundable.
An additional 55% of eligible salaries are included in qualifying expenditures to capture overhead related to R&D. This simplified overhead calculation makes the calculation easy and beneficial for companies with high R&D staff costs.
|Canada Small and Medium Businesses (SMB)
||Canada Large Companies (LC)
|Federal: 35% Tax Credit
Provincial: 10% to 30% depending on the province
|Federal: 15% tax credit
Provincial: 3.5% to 30% depending
on the province
||The Tax Credit for SMEs is refundable and can provide up to 54.5% of eligible expenditure.||The Federal Tax Credit for LC is non-refundable.
The Provincial Tax Credit for LC can be refundable, depending on the province.
|Eligible Claim Period
||The Canadian Revenue Agency (CRA) allows claims for fiscal years closing up to 18 months in the past.|
||The programme was founded in 1944, the first in the world, and has existed in its current form since 1986.|
|Ease of Application
||The regime does not require pre-approval (while pre-approval is available for companies requesting it), but audits are expected and detailed.
The regime requires the company to fill in both Federal (T661) and Provincial forms, which are relatively comprehensive and complex.
The Federal form includes a financial, as well as a technical aspect. The technical part requires the company to present in a specific format (limited to 1,500 words) for each of the claimed projects (up to 20 projects).
|Regulating Body Policies
||The Federal portion is administrated by the CRA and is responsible for assessing the technical and financial eligibility.
At a province level, the Quebec portion is administrated by Revenue Quebec, where the assessment is limited to financial eligibility. In Alberta the portion is administrated by Alberta Treasury Board and Finance. The assessment
is limited to financial eligibility. All other provinces are also administrated by CRA.
||The following are eligible costs for the regime:
|Issues to Consider