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.
We often tell people that failed projects are embraced by the SR&ED program, and sometimes it can be a little hard to understand exactly why. I mean, isn’t the program meant to promote innovation, and to encourage technological development? If so, then why are projects that don’t result in a more innovative product or process applicable for the SR&ED program?
This goes back to the three criteria of the program: Technological Advancement, Technological Obstacles and Technical Content.
When looking at a failed project, you most likely faced a number of Technological Obstacles while working on it – these obstacles are anything that prevented you from getting to the final objective, so obviously in a failed project you faced a number of obstacles.
The technical content shows the systematic investigation that was done while trying to reach the final objective, which would be done for both failed and successful projects.
Lastly, your knowledge has been expanded in the instance of failed projects as well – in these instances, you now have the knowledge that there is no way that you have found to get to the final objective.
So yes, failed projects definitely qualify for the SR&ED program, as long as they too fulfill the three criteria of the program.
With the number of government grants, loans and other assistance available, we have frequently been asked whether companies can still file for the SR&ED program if they’re taking advantage of other assistance programs. There are so many different programs available: from IRAP, to small business grants, to funding that will help make things more energy efficient, to workshare programs, just to name a few.
So what does this mean when a company files for the SR&ED program? CAN a company get money back through the SR&ED program if they’ve already received some sort of government assistance for the project?
Well, the short answer is both yes and no.
Mainly, it depends on how much of your project was covered by other government assistance programs. If your project was fully-funded by other grants and loans, then your project is unfortunately not applicable for the SR&ED program.
Or, as it more often happens, if your project was only partially funded by the government, then you can claim for SR&ED on the portion that was not funded.
The SR&ED program is vital for any Canadian business doing work that runs into technological obstacles – don’t forget to include it in your funding plans.
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