The Conference Board of Canada issued a report on Tuesday on the state of Canada’s innovative abilities. Unfortunately, although we have the world’s best R&D funding program, we do not seem to rank very well on the global scale of taking the innovation we do and profiting from it. In fact, we ranked “14th among 17 industrialized nations for its ability to turn knowledge into money-making products and services.”

One of the sources of the problem suggested is that Canadian companies feel insecure about purchasing innovative products from other Canadian companies – and if a company cannot sell its products to other Canadian companies, then global companies start to question the value of the products.

Another source of the problem that is suggested is that Canada exports raw materials to be processed elsewhere instead of processing it here ourselves.

The report is not all bad news, however. It has been suggested that biofuels is an industry where Canada could become a leader.

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Aggressive offshore competition isn’t new to us here. Let’s face it – it can be tough to survive when products similar to yours can be purchased for a fraction of the price from a company that doesn’t even operate in Canada. This can lead to a huge reduction in sales, can result in non-profit situations, and can cause difficulties for any company that is trying to remain competitive. In some cases, this causes business closures.

Businesses need to do what they can to offset those financial situations, and reclaiming costs for projects where you faced challenges can help your company become profitable again.

The SR&ED (Scientific Research and Experimental Development) program can definitely assist in situations like this – a lot of expenses can build up through test runs, failed projects and lengthy experimentation, and reclaiming some of these costs can make a very large difference in a company’s financial standing. The recovered costs can help offset the effect that offshore competition may have on your business, and can be used to invest back into your company.

Have you taken a look at how SR&ED can help you remain competitive with offshore competition?

Canadian companies definitely have an advantage when it comes to research and development tax credits. Canada is rated among the Top G20 countries when it comes to Research and Development. The government encourages Canadian companies to do their research in Canada with tax credits and cash back incentives to remain manufacturing in Canada.

Foreign companies can benefit as well. The benefit to a foreign owned company can be the significant reduction or even elimination of their Canadian taxes owed, with the benefit of retaining the rights to the SR&ED program.

Foreign companies become eligible when they become a subsidiary of a foreign parent and can claim 20% tax credits on qualifying SR&ED activities. Another way to become eligible is to become a Canadian-controlled private corporation (CCPC), as long as an owner owns less than 50% of the company’s shares, so the majority of ownership is Canadian. Becoming a CCPC allows the company to claim 35% cash back on qualifying SR&ED activities.

For more information check out this link: http://investincanada.gc.ca/eng/publications/rd-tax-credit-fact-sheet.aspx