The aim of the Scientific Research & Experimental Development (SR&ED) program is to provide financial support in the form of cash refunds to Canadian businesses that conduct SR&ED in Canada. This financial support is intended to encourage businesses to develop new or improved technology and advanced products or processes. In British Columbia, Alberta and Ontario, the SR&ED refund can be as much as 64 cents back on every incremental R&D dollar spent!

How Does the SR&ED Tax Credit Program Work?

This federal program provides over 3.6 billion dollars in funding every year to over 20,000 small and large companies across Canada. Here is how the program works:

  • The SR&ED Canada Tax Credit Program acts like a government grant for Canadian Controlled Private Corporations that meet certain criteria.

  • In certain circumstances, the Federal Government provides a refundable tax credit rate of 35% of qualified expenditures.

  • If your company doesn't owe any tax in a given year, the SR&ED Tax Credit is refunded in cash.

  • The provinces also provide additional R&D incentives. For example, BC, Alberta and Ontario make available a 10% refundable tax credit.

  • Large, foreign controlled, or public companies which are not eligible for the federal 35% refundable tax credit are eligible for a 15% non-refundable federal SR&ED tax credit.

  • There are four key stages to an SR&ED Tax Credit claim: the identification of an eligible project, the identification of the related qualifying expenditures, the composition of a detailed Technical Description, and the filing of the requisite corporate taxation forms.
     
  • Each SR&ED refund claim is screened and reviewed at the Canada Revenue Agency for both their scientific and financial eligibility.

  • Many complex provisions exist under the constantly changing Income Tax Act.

  • Numerous precedent-setting court cases can impact a claim.