Posts Tagged ‘tax credit’

Funding Webinar- Optimizing Returns from Multiple Government Funding Sources

Domestic and international competition is forcing Canadian businesses to develop new or improved products, increase productivity and expand sales in global markets. Financing for innovation or growth has always been a challenge for many companies in Canada. Both the federal and provincial governments provide their financial support through over $20 billion in various funding programs each year. Sourcing funding from both SR&ED tax credits and other direct government incentive programs can give companies the edge they need to take their business to the next level.

WHEN: Thursday, February 11, 2016
WHERE: Online @ 11:00am EST

Learn About:

  • Types of government funding opportunities
  • Eligiblility for financing, funding, and tax credits
  • Optimizing your returns from multiple government funding programs
  • Compliance issues between SR&ED and other government funding sources

Speakers

Gerry_Small

Gerry Fung, CPA, CMA, P.Eng.
Vice President, Business Services

 

Nude Fine Art Work Shop with Steve Richard

Jen Mahon, M.A.Sc., B.Eng.Sc.
Vice President, Operations

Summary of Provincial and Territorial R&D Tax Credits

The Canada Revenue Agency has recently released the most current summary of provincial and territorial R&D tax credits. Recent program developments by region include:

Manitoba

  • As of January 1, 2014, the definition of ‘eligible expenditures’ has been amended in line with the federal reduction in the prescribed proxy amount to 55%, and the reduction to 80% for contract payments (except contract payments to eligible educational institutions in Manitoba); however, despite the elimination of capital expenditures from the federal tax credit, these costs remain eligible under the Manitoba tax credit.
  • Currently, non-refundable tax credits can be carried back 3 years. Non-refundable tax credits can be carried forward 10 years for tax years ended after 2003 or 7 years for tax years ended before 2004 and applied against the Manitoba income taxes payable. The Manitoba 2015-2016 Budget and Bill 36 propose to extend the carry forward period for non-refundable tax credits to 20 years for tax years ended after 2005.

Saskatchewan

  • The Saskatchewan non-refundable R&D tax credit rate was reduced from 15% to 10% for all eligible expenditures after March 31, 2015.

British Columbia

  • Credit has been extended three years to September 1, 2017.

Quebec

  • As per Quebec’s 2014 budget, all R&D tax credit rates were reduced by 20% for all eligible expenditures incurred after June 4, 2014.
  • A minimum expenditure threshold has been implemented for fiscal years beginning on or after December 3, 2014. With corporate assets below $50 million in the previous year, the first $50,000 of R&D is excluded from eligibility. This minimum threshold will increase linearly up to $225,000 for corporations with assets of $75 million or more in the previous year.
  • All R&D credits (including pre-competitive research, university and public institute research, and research consortium contributions/ rights) have been standardized with the R&D wage tax credit for fiscal years beginning on or after December 3, 2014 to a base rate of 14% (CCPCs with assets below $50 million will qualify for a rate of 30% on the first $3 million of eligible expenditures).
  • In line with amendments to the federal SR&ED tax credit, capital expenditures incurred after 2013 are not eligible. In addition, claims filed after 2013 will be subject to a $1,000 penalty for missing, incomplete, or inaccurate information.
  • As of June 4, 2014, the 10% increase in the R&D wage tax credit for biopharmaceutical corporations is eliminated (previously qualified corporations will continue to receive the benefit at a decreased rate of 8%)

 

The following table provides a breakdown of provincial R&D tax credits as of June 30, 2015.

 

Province/ Program Rate Deadline
Newfoundland and Labrador 15% refundable 12 months after year end
Nova Scotia 15% refundable 18 months after year end
New Brunswick 15% refundable (expenditures incurred after 2003)10% non-refundable (expenditures incurred before 2003) N/A
Manitoba 20% non-refundable (expenditures incurred after March 8, 2005)15% non-refundable (expenditures incurred before March 9, 2005); however, the 2010 Budget extended refundability of the Manitoba R&D tax credit to one-half of eligible expenditures for in-house R&D expenditures not undertaken by an institute in Manitoba and incurred after 2012) 12 months after year end
Saskatchewan 10% non refundable (expenditures after March 31, 2015)15% refundable for all eligible expenditures occurring between March 19, 2009 and March 31, 2012 N/A
Alberta 10% refundable (on up to $4 million in eligible expenses) 15 months after year end
British Columbia 10% non-refundable; refundable for CCPCs up to 10% of the expenditure limit 18 months after year end
Yukon 15% refundable 12 months after year end
Ontario Innovation Tax Credit (OITC) 10% refundable (annual expenditure limit of $3M: Phased out if taxable paid-up capital (PUC) for previous year exceeds $25M or is between $500,000 to $800,000; expenditure limit is eliminated when PUC reaches $50M) N/A
Ontario Business-Research Institute Tax Credit (OBRITC) 20% refundable (qualified expenditures are capped at $20 million annually among associated group of corporations) N/A
Ontario Research and Development Tax Credit (ORDTC) 4.5% non-refundable N/A
Quebec
R&D Wage tax credit; Tax credit on fees paid to a research consortium; Precompetitive tax credits
14% to 30% (after June 4, 2014)17.5% to 37.5% for costs incurred between April 22, 2005 to June 4, 2014  N/A

 

Leveraging Hiring Grants and SR&ED Tax Credits

The Scientific Research & Experimental Development (SR&ED) tax credit program, administered by the Canada Revenue Agency, allows companies that engage in processes that result in new or improved product development to secure government funding to support their innovative work. The program provides tax credits on eligible labour, overhead, material, and subcontracting costs dependent on the structure of the company. Through the SR&ED program, foreign owned or public corporations may receive 15% of eligible expenditures as tax credits, while Canadian controlled private corporations may receive 35% of eligible expenditures claimed as tax credits.

SR&ED projects can often lead to innovations that necessitate the creation of new product lines, or the expansion of production capabilities. In these instances, and for companies generally looking to increase their workforce, there are government funding programs that can help your company hire new workers, specifically youth, to increase your employee base. One such example is the Career Focus program. The Career Focus program was launched to assist youth between the ages of 15 and 30 gain employment experience related to their field of study or career objectives. The program dictates that proposed projects must involve a minimum of 8 youth participants.

Through the Career Focus program, you can increase your workforce through the hiring new youth employees. By combining SR&ED funding and hiring grant opportunities, your company may be optimize your return from government funding programs, in that when those new youth employees are engaged in eligible R&D projects, your company can claim for other expenditures not covered by Career Focus through the SR&ED program. This means your company can free up capital to invest more internal funds towards your business goals.

As your SR&ED and government funding partners, we here at NorthBridge Consultants are experts in how multiple government funding programs can be used to maximize your return and ensure you have the right employees for your business needs. If you would like additional information on, SR&ED, or other government funding programs, do not hesitate to contact one of our Client Managers at info@northbridgeconsultants.com for your free consultation.

 

 

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The 2015 Ontario Provincial Budget: Digital Media Review

In the 2015 Ontario Budget, published by the Ministry of Finance, the Government of Ontario announced a review of the Ontario Interactive Digital Medial Tax Credit program (OIDMTC). As a result of this review, the government has re-stated and re-emphasized the program to focus on interactive entertainment products, and on educational products for children under the age of 12. Under the reviewed OIDMTC program, ineligible products would include news applications, search engines, social media platforms, and functional databases.

Ontario also proposed an amendment to the requirement that at least 90% of the digital media product be developed in Ontario by the company applying to the OIDMTC program. This requirement will be replaced with new stipulations:

  1. 80% of total labour costs for eligible products must be attributable to qualifying salaries and wages as well as qualifying remuneration (contract payments to Ontario freelancers operating either as sole proprietors or through personal service corporations).
  2. 25% of total labour costs for eligible products must be attributable to wages of the corporation’s employees.

These rules will not apply to projects that were started before April 24th, 2015.

In the budget, it was also reported that Ontario provided approximately $335 million between 2014-2015 to the film and television industry through the Ontario Film and Television Tax Credit (OFTTC), the Ontario Production Services Tax Credit (OPSTC), and the Ontario Computer Animation and Special Effects Tax Credit (OCASE). Moving forward, the OPSTC will be reduced from 25% to 21.5% for expenditures incurred after April 23rd, 2015, and the OCASE will be reduced from 20% to 18% for expenditures incurred after the same time. Despite the reductions, both programs are noted to remain competitive compared to other Canadian jurisdictions.

 

 

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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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