Scientific Research and Experimental Development (SR&ED)

How to File your own SR&ED tax credit and save thousands of dollars?

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SR&ED stands for Scientific Research & Experimental Development and is a federal tax incentive program administered by the Canada Revenue Agency (CRA).

The SR&ED program encourages Canadian businesses of all sizes, and in all sectors, to conduct research and development

(R&D) in Canada.

Projects that qualify

To qualify for the SR&ED program, work must advance the understanding of scientific relations or technologies, address scientific or technological uncertainty, and incorporate a systematic investigation by qualified personnel.

Work that qualifies for SR&ED tax credits includes:

•experimental development to achieve technological advancement to create new materials, devices, products, or processes, or improve existing ones;

•applied research to advance scientific knowledge with a specific practical application in view;

•basic research to advance scientific knowledge without a specific practical application in view; and

•support work in engineering, design, operations research, mathematical analysis, computer programming, data collection, testing, or psychological research, but only if the work is commensurate with, and directly supports, the eligible experimental development, or applied or basic research.

The program gives claimants cash refunds and/or tax credits for their expenditures on eligible R&D work done in Canada.  Canadian science and technology companies rely on SR&ED as their largest single source of government R&D funding.  In Ontario, the Government will refund businesses up to 72.8% (Quebec 82%) of the salary it has incurred to development or improve a product or process that qualifies under the SR&ED program.  Eligible expenditures for SR&ED projects can include the following:

• Salaries and Wages

• Materials

• Contractor Costs

• Lease Costs

• Certain Capital Assets

• Overhead

 

Who qualifies?

A Canadian-controlled private corporation (CCPC) can earn an investment tax credit (ITC) of 35% up to the first $3 million of qualified expenditures for SR&ED carried out in Canada, and 20% on any excess amount. Other Canadian corporations, proprietorships, partnerships, and trusts can earn an ITC of 20% of qualified expenditures for SR&ED carried out in Canada.


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