Amount:

No Fixed Amount

Type of Program:

Tax Credit


Description:

The Scientific Research and Experimental Development (SR&ED) program uses tax incentives to encourage Canadian businesses of all sizes and in all sectors to conduct research and development in Canada.

Comments on Funding:

These tax incentives come in three forms: an income tax deduction, an investment tax credit (ITC), and, in certain circumstances, a refund.

The SR&ED investment tax credit (ITC) ranges from 15% to 35% of the applicant's qualified SR&ED expenditures.

Canadian-controlled private corporations (CCPC), generally, can earn a refundable ITC (investment tax credit) at the enhanced rate of 35% on qualified SR&ED expenditures of $3 million. They can also earn a non-refundable ITC at the basic rate of 15% on an amount over $3 million.

However, if the applicant is a CCPC that also meets the definition of a qualifying corporation, it also earn a refundable ITC at the basic rate of 15% on an amount over $3 million and 40% of the ITC can be refunded.

Other corporations can earn a non-refundable ITC at the basic rate of 15% on qualified SR&ED expenditures. They can use the ITC to reduce tax payable.

Individuals (proprietorships) and trusts can earn a refundable ITC at the basic rate of 15% on qualified SR&ED expenditures. They first must apply the ITC against tax payable before the Canada Revenue Agency can refund 40% of the unclaimed balance of ITCs earned in the year.  


When It Ends:

Ongoing

Deadline:

Rolling deadline

Eligibility:

Applicants must be:

  • Canadian-controlled private corporations
  • other corporations,
  • individuals (proprietorships) and trusts, 
  • members of a partnership
  • doing research and development conducted, for the most part, in Canada and must be either basic research, applied research or experimental development.

Documentation Needed:

Applicants must:

  • file an income tax return (Form T2038, Investment Tax Credit for individuals and Schedule T2SCH31, Investment Tax Credit for corporations),
  • include a completed Form T661 to provide technical information and to calculate the qualified SR&ED expenditures used for the investment tax credit,
  • keep supporting information and records to prove that the SR&ED work was performed and allowable expenditures were made in the year ( documentation that is dated, signed and specific to the work performed, complete and organized records that support the claimed expenditures).

About the author 

Maurice

Maurice (Moe) Muise learned the ins-and-outs of government while an employee of the Government of Canada in Ottawa for 10 years. His current focus is helping small businesses in Ontario to identify and maximize government grants to grow their business.
Click here to learn more about Moe's background and how he can help your business.

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