The Canadian Scientific Research & Experimental Development (SR&ED) program offers some of the most generous incentives in the world. Our BDO advisors can help you figure out how you can access them.
SR&ED tax incentives
When you are looking for ways to raise funds to help you develop or improve products or processes, consider how much money you are currently leaving on the table. The SR&ED program’s tax incentives may apply to activities that are already taking place.
Under Canadian tax law, the key benefits of qualifying SR&ED expenditures include:
- Eligibility for investment tax credits (ITCs) can reach up to 35% of eligible expenses federally; they may reduce tax payable or, for certain Canadian-controlled private corporations, be fully refundable in cash
- A full tax deduction in the year the expenditures are incurred may even apply to R&D capital assets, purchased before 2014, that are not just for regular commercial use
- The ability to “pool” SR&ED expenditures, which enables you to indefinitely carry forward these deductions to the extent that they are not currently needed
- Most provinces offer additional incentives for qualifying activities which increase the benefits of filing a claim; effectively combined federal and provincial rates on labour, with proxy overheads added, can often exceed two-thirds of the underlying costs
SR&ED activities are not limited to those taking place in a traditional research lab. Most claims are for experimental development, which often takes place right on the shop floor. Although a project may start in a lab, it will not be completed there.