Posts Tagged ‘canadian innovation’

There is no denying that Canada has one of the best programs as far as funding for companies that perform R&D goes. And while it is promoted frequently for Canadian Controlled Private Corporations, there are many other companies that can take advantage of this program.

Take, for instance, an American-owned company that has a branch in Canada. This Canadian branch manufactures custom products for its customers, and regularly has to work through technological obstacles to create the final product that was required.

Because this American-owned company has a branch that operates in Canada, and pays taxes to the Canadian government, this foreign-owned company would be eligible for the Scientific Research and Experimental Development program. Unlike privately-owned businesses, however, this foreign-owned company would be eligible to receive 20% of their claim in the form of tax credits. These tax credits can be applied retrospectively ten years, or can be applied forward three years.

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.

Source

Usually when we talk about claiming for SR&ED, we talk about how it affects CCPCs. For this reason, I wanted to touch specifically on public companies today. In the future, I will also be dedicating posts specifically to partnerships, foreign-owned and other types of companies eligible for SRED.

While being a public company may not be as attractive as a CCPC when it comes to the SRED program, there are still some benefits that the SR&ED program provides for public companies that conduct research and development in Canada. Public companies can earn an ITC (investment tax credit) of 20% of qualified SR&ED expenditures.

This means that 20% of the claim will go towards any taxes that the public company owes; the tax credit is non-refundable, but can be applied to taxes owing up to three years or 10 years forward. While it’s not as exciting to get tax credits as it is to get a refund, this can still help out a company quite a bit.

There are also the provincial SRED programs to take a look at. Most provinces have their own programs to help companies (both private and public) perform R&D in the province. We’ve outlined what provincial tax credits are offered in a previous article that we had published.