Posts Tagged ‘tax credits’

Workshop- Grow Your Business with Government Funding

Are you a manufacturing, technology, or food processing company with operations in Canada?

Sourcing funding from SR&ED tax credits, government loans, and direct government incentive programs can help accelerate your company’s expansion.

Attend this workshop to learn from government funding experts about your eligibility for various funding programs and to learn how to secure funding from these opportunities.

Ideal for owners and executives who want to learn about:

  • Types of government funding opportunities;
  • Eligibility for financing, funding, and tax credits
  • How to apply for government funding
  • Optimizing your returns from multiple government funding programs

Event Details:

Speaker:
Gerry Fung, CPA CMA, P.Eng.
VP of Business Services at NorthBridge Consultants

Date & Time:
Thursday, September 21, 2017
2.00pm – 5.00pm

Location (pending venue confirmation):
Sheridan College – Hazel McCallion Campus.
4180 Duke of York Blvd, Mississauga, ON, L5B 0G5 (MAP LINK)

Tickets:
$99 (non refundable)

To register, please visit www.grantx.ca or call 416-524-7743/416-827-5189
Email info@grantx.ca or outreachforcecanada@gmail.com

 

Presented by Grantx Inc., NorthBridge Consultants, and Outreach for Canada.

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OIDMTC Supports Development of Digital Media in Ontario

The Ontario Interactive Digital Media Tax Credit (OIDMTC) is a refundable tax credit that supports the development of interactive digital media in Ontario.  Eligible projects must be interactive digital media  that includes content designed to educate, inform, or entertain that incorporates at least two of the following: text, images, or sound.

The tax credit funds up to 40% of eligible labour, marketing, and distribution costs for products designed, produced, and sold by a gaming or digital media company. The maximum contribution per project is $100,000 for marketing and distribution costs, which can be incurred 24 months before product launch and up to 12 months after, but the labour contribution is unlimited. In order to be eligible for the program, a company must be operating in Ontario and not have revenue greater than $20 million, and have developed more than 90% of the product(s) in question.

Companies that produce interactive digital media projects for clients on contract are also eligible for funding, though their eligible labour costs are capped at 35% and no funding is available for marketing and distribution.

NorthBridge Consultants has experience with the OIDMTC application process and will provide the necessary guidance for your claim. Our team of business analysts and technical writers can assist with the completion of application information, the preparation of financial information, tracking and documentation of eligible expenditures, and the required reporting after application submission.

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Linking SR&ED to Government Grants: IRAP

The Provincial and Federal government work together to deliver funding programs to encourage companies to invest in innovation.  The Scientific Research and Experimental Development (SR&ED) program funds R&D work conducted in Canada in the form of a tax credit. On the other hand, the Industrial Research Assistance Program (IRAP) provides grant funding for new technology-driven projects.

IRAP supports companies that are investing in new technology projects that lead to new products, processes, or services in Canada, and will cover labour and subcontractor costs.  IRAP is ideal for companies that require funding for early-stage R&D and prototyping, whereas SR&ED has a wider scope of coverage that also includes experimental development.  Applicants are allowed to apply to both IRAP and SR&ED as expenditures are not double-claimed. Since IRAP eligible costs can potentially overlap with the eligible costs for the SR&ED program, it is critical that companies implement proper tracking systems to separate the costs.

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R&D incentive programs across the globe

In light of proposed changes to the SR&ED program announced in March’s federal budget, Canada retains a position as offering one of the most attractive R&D incentive programs globally.

Let’s look at a few R&D tax credit programs across the globe to see how SR&ED stacks up. Currently, Canada’s SR&ED program offers a 35-percent refundable tax credit to Canadian Controlled Private Corporations (CCPCs) on the first $3 million of R&D expenditures, and a 20-percent non-refundable Investment Tax Credit to non-CCPCs. The general 20-percent ITC is scheduled to reduce to 15 percent beginning 2014.

To the south, the United States’ Research and Experimentation (R&E) tax credit program is in a state of transition. The R&E tax credit has existed as temporary credit since 1981, extended 14 times in indeterminate durations. Since FY2010, President Obama’s administration has been proposing to re-haul the program to permanent status, and to expand and simply the credit. Currently, the R&E tax credit program exists in two formula:  the “regular” credit is worth 20 percent of qualified research expenditure above the product of the taxpayer’s “fixed base percentage”, the ratio of its research expenses to gross receipts for the years 1984 to 1988, and the average of the taxpayer’s gross receipts for the four preceding years. According to a report compiled by the Department of the Treasury last year, the regular formula is “outdated,” with “little reason to believe that the firm’s ratio of research spending to gross receipts from more than two decades ago, when multiplied by its average gross receipts over the prior four years, is an appropriate base for the taxpayer.”

The alternative simplified research credit (ASC) is equal to 14 percent of qualified research expenditure exceeding 50 percent of the average qualified research expenditure for the three preceding taxable years. The administration further proposes increasing the ASC rate from 14 to 17 percent. Both methods use an incremental expenditure method of calculation as compared to Canada’s actual benefit mechanism.

France also uses an incremental expenditure method for the basis of their R&D tax credit, Crédit Impôt Recherche (CIR), which covers 40 percent of R&D expenses in the first year, 35 percent in the second year and 30 percent in subsequent years up to €100 million (5 percent of expenses above this threshold). The CIR is deducted from the tax to be paid or refunded at the end of the third year. In certain cases, young companies are able to receive refunds immediately. CIR considers all R&D expenses. As well, expenses related to operations subcontracted to French and European public-sector research bodies are assessed at 200 percent.

In an innovation report card released by the Conference Board of Canada, Switzerland and Ireland ranked first and second followed by the U.S. in third in the broad topic of Innovation, while Canada trailed at 14. Switzerland currently does not offer an R&D tax credit incentive (yet does offer a patent box incentive to boast commercialization of research outcomes).

Ireland offers a tax credit of 20 to 25 percent for companies performing R&D; Ireland also offers a corporate tax deduction for non-capital R&D expenditures incurred by Irish trade or business companies.

Other countries that offer R&D tax credits include Australia, Austria, Belgium, Italy, Japan, Korea, Portugal and Spain.

In addition to R&D tax credits, there are additional or alternative means for incentivizing R&D and Intellectual Property. Six European Union countries have adopted “patent box” regimes to reduce the corporate tax rate on eligible intellectual property (IP) income to a nominal rate of 5 to 15 percent. Countries offering patent box regimes include Belgium, France, Hungary, Luxembourg, Netherlands, and Spain, and the UK government has committed to introducing a 10-percent patent box regime effective in 2013.

To learn more about the SR&ED program and other research and development incentives, contact Northbridge today.

Direct Government Funding – Benefits and Detriments

SR&ED and NRC IRAP are both substantial business support programs offered by the Canadian federal government.  However, one of the major differences between the 2 programs is that NRC IRAP endorses direct up-front funding, whereas SR&ED is a tax credit for expenses that have already been incurred.

In light of the recent Jenkins report, there has been significant discussion over the benefits and drawbacks of direct funding.  Direct funding allows the government to “pick winners” and scrutinize where funding is allocated, according to government policy.  Because companies who receive direct funding have to present a business case for each and every funding application, it allows the government to put “checks and balances” in place to ensure that the funding will be utilized for its intended purpose.  Direct funding mechanisms were pivotal in building capabilities in what became leading sectors in Ontario.

However, the downside of direct funding models, is that, according to a research paper by Nelson and Langlois (1983), the practice of “picking winners” by the government was the least successful form of government support.  Direct funding generally creates a larger administrative burden, especially to smaller enterprises and start-up ventures, who can ill afford to have an in-house grant writing team.  A Canadian firm intent on bringing its technology to market will likely be deterred from seeing assistance through direct funding because the lengthy approval process can delay the onset of time-sensitive work.

Secondly, a move towards direct funding could threaten the global competitiveness of Canadian enterprises.  International trade agreements, such as the World Trade Organization Agreement on subsidies and Countervailing Measures, cap direct subsidies to business.  For example, the controversial US-Canada lumber dispute revolved around Canadian stumpage fees being too low, making the fees de facto subsidies.

Finally, under a direct funding model, there is no legal process to appeal or obtain redress for disagreements between the administrators and the applicants for the funding.  A direct funding approach has no legislative support, and applicants can easily be discriminated upon if their objective does not directly advance government policy.  On the other hand, the tax credit system provides legislated rules so that any dispute about eligibility or payment can be heard by the courts.

There are arguments to be made for both tax credits and direct funding.  However, at the end of the day, it is important to keep in mind that entrepreneurs (and the start-up ventures they create) are the backbone and future of our economy.  It is paramount that these start-up ventures obtain the upfront capital necessary in order to undertake risky ventures, some of which will evolve and transform the economic landscape both in our country, and around the world.  Will the next RIM please stand up?

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