Archive for the ‘SR&ED News’ Category

Ontario Budget 2018 Highlights

The Ontario 2018 Budget, tabled on March 28, 2018, projects a growing deficit over the next three years and is predicted to resume a downward trend in 2022 with accumulated deficit expected to decline from 23.2% of gross domestic product (GDP) in 2017-18 to 22.1% by 2022.

The Ontario Budget proposes several measures and investments that impact businesses, including:

Innovation

  • An increase to the Ontario Research and Development Tax Credit (ORDTC) from 3.5% to 5.5% for eligible R&D expenditures over $1M (per taxation year) incurred on or after March 28, 2018.
  • Enhancements to the Ontario Innovation Tax Credit (OITC) for eligible R&D expenditures incurred on or after March 28, 2018 based on the ratio of R&D expenditures to gross revenues. Companies with a ratio of R&D expenditures to gross revenue of:
    • 10% or less will continue to claim the OITC at a rate of 8%;
    • 10-20% will be eligible for an enhanced OITC rate that will increase from 8% to 12% on a straight-line basis; and
    • 20% or more will be eligible to claim the OITC at a rate of 12%.
  • Expansions to the Ontario Interactive Digital Media Tax Credit (OIDMTC) eligibility criteria to include broadcaster purchased or licensed film/television websites that host film, television, or Internet production content not previously assessed (before Nov 1, 2017).
  • A review of various tax incentives implemented in other jurisdictions such as preferential corporate income tax rates (i.e., patent boxes), tax refunds, tax deductions, and exemptions with the intention of developing a provincial incentive to encourage Intellectual Property (IP).
  • An additional $50M over 10 years for the New Transformative Technology Partnerships Fund for businesses, SMEs, and scale‐ups as well as post-secondary and research institutions to collaborate on new dynamic products and services in artificial intelligence (AI), 5G wireless communications, autonomous vehicles, advanced computing, and quantum technologies.

Business Growth

  • In parallel with the 2018 Federal Budget proposal to phase-out or grind the $500,000 small-business limit, the Ontario Budget proposes to phase out the small-business limit on a straight-line basis for CCPCs (and associated corporations) earning between $50,000 and $150,000 of passive investment income in taxation years beginning after 2018.
  • Ending the electricity debt retirement charge (DRC) for mid-sized commercial and industrial non-ICI or non-RRP, Class B consumers as of April 1, 2018.
  • An additional $100M over 10 years for the Eastern Ontario Development Fund (EODF) and the Southwestern Ontario Development Fund (SWODF) to support regional economic development by creating jobs, attracting private sector investment and promoting innovation, and encouraging collaboration and cluster development.
  • An additional $500M over 10 years for the New Economy Fund for investing in priority sectors such as advanced manufacturing, information and communication technology (ICT), life sciences, and clean-tech.
  • An additional $85M over 3 years for the Northern Ontario Heritage Fund to stimulate economic development and diversification across the region.
  • An additional $100M over 10 years for a new Greater Toronto & Hamilton Area Fund to support SMEs in the GTA and Hamilton area.

Export Market

  • Work to implement a Global Trade Strategy to diversify and promote trade in Ontario. This will include the Accelerate to International Markets program, the Global Growth Fund, and the Magnet Export Business Portal.

Startup Support

  • An additional $85M over 10 years for a new Venture Technology Fund to support a select number of very high‐potential, fast‐growing firms in expanding to become globally competitive.
  • An additional $15M over the next 3 years to NextAI, a Toronto based accelerator for early stage startups that leverage AI technologies.

Workforce Development

  • An additional $170M over 3 years for the new Ontario Apprenticeship Strategy to support transition into apprenticeship from high school, make the system easier to navigate, and to improve access for apprentices to high‐quality jobs upon completion.
  • Transforming the Apprenticeship Training Tax Credit (ATTC) into the new Graduated Apprenticeship Grant for Employers (GAGE) to encourage employers to ensure that apprentices complete their training.

CRA Begins Launching SR&ED Pre-Claim Review Pilot

In August 2016, the Canada Revenue Agency (CRA) began to launch the Pre-Claim Review pilot program in order to review and determine whether R&D projects that are in progress qualify for the Scientific Research and Experimental Development (SR&ED) tax credit program.

This follows the cancellation of the similar Pre-Claim Project Review service at the end of June 2016, which had provided preliminary verbal opinions regarding the SR&ED eligibility of the proposed or initiated projects.

The new free review program aims to provide certainty that eligible R&D projects will be accepted as filed while they are still in progress, when it is easier to defend the projects and before the formal claim is prepared at the end of the fiscal year. After acceptance into the pilot program, the CRA would conduct a review to evaluate the SR&ED eligibility of the scientific or technological knowledge base as well as the work being performed.

A limited number of participants will be selected as the pilot program is implemented in August, October, or November, depending on the province or territory—see the table below for more details. There are a few criteria to be met, such as having previously filed for SR&ED while meeting the basic requirements for claiming SR&ED tax incentives.

The launch of the new review service also follows the recent launch of the Pre-Claim Consultation service, which assists potential claimants in determining whether their work is eligible for SR&ED tax credits and what supporting documents they should keep before they submit a claim. These two programs are intended to increase the predictability and consistency of the SR&ED program by the CRA.

Companies that are interested in using these services can submit a completed Pre-Claim Consultation Request Form or Pre-Claim Review Request Form, or get in touch with their local SR&ED contact for more information.

Pre Claim Review Pilot Program Implementation Schedule

British Columbia August 2016
Alberta August 2016
Saskatchewan August 2016
Manitoba August 2016
Yukon August 2016
Northwest Territories August 2016
Ontario October 2016
Nunavut October 2016
Quebec November 2016
New Brunswick November 2016
Nova Scotia November 2016
Prince Edward Island November 2016
Newfoundland and Labrador November 2016

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Revisions to Quebec SR&ED Tax Credit Program

During his December 2nd economic update, Quebec Finance Minister Carlos Leitao announced two major revisions to the Quebec SR&ED tax credit program: (1) Introduction of a minimum eligibility threshold, and (2) Standardization of enhanced tax credit rates.

Introduction of Minimum Eligibility Threshold

Leitao introduced amendments to the legislation to exclude, from tax assistance in the form of R&D tax credits, the first dollars spent annually by a taxpayer below an exclusion threshold.  Minimum expenditure thresholds of $50,000 (for companies with less than $50 million in assets) and $225,000 (for companies with assets totalling over $75 million) will be introduced.  The threshold will increase linearly from $50,000 to $225,000 for companies with assets between $50 million and $75 million.

Standardization of Enhanced Tax Credit Rates

Quebec’s enhanced SR&ED tax credit rates for research contracts, private partnership research, and fees paid to a research consortium will be standardized (to be set at same rate as R&D wages).  The rate of the refundable tax credit for R&D wages is 14%, but it can vary from 14% to 30% in the case of a Canadian-controlled corporation.

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New SR&ED Videos

Canada Revenue Agency (CRA) has released a series of new educational videos about the SR&ED program.  The videos cover topics including: who can claim SR&ED tax incentives, what work qualifies for SR&ED, how to calculate SR&ED expenditures and investment tax credits, and the SR&ED application process.

The Canadian Scientific Research and Experimental Development (SR&ED)  tax incentive program provides both refundable and non-refudnable tax credits to corporations, partnerships or individuals who conduct scientific research or experimental development in Canada.  Please view NorthBridge’s supplementary video to find out more about the SR&ED program.

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Northbridge in the Media

Check out our special report on changes to the SR&ED program in 2014 (published in Canadian Manufacturing) here.

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