SR&ED in the Information Technology Industry

Eligible sub-sectors include:

• firmware development
• computer networking
• data transmission protocols
• gaming
• software development
• business intelligence systems
• computer modeling & simulation

In 2009, Information and Communications Technologies (ICT) contributed $59.4 billion to Canada’s GDP. Approximately 31,500 companies comprise the ICT sector, of which 78.6% are in the software and computer services industries and 10.6% in the wholesaling industries. Within the software and computer services industries, over 94% of the companies specialize in computer systems design services. The number of large companies in the Canadian ICT sector is relatively small, in 2008, there were approximately 100 companies with more than 500 employees.

The government current offers several incentives to development in information technology, including a cross-province range of Digital Media Tax Credits. Furthermore, in-house software development is usually, but not always, eligible for SR&ED. The SR&ED program generally favours labour-intensive projects. Because in-house software development usually requires significant labour, the SR&ED program produces extremely lucrative claims.

As financing is sometimes difficult to come across for small- to medium-sized companies, it is extremely important to take advantage of SR&ED tax credits. Often, for CCPCs, SR&ED can take the form of refundable (cash) credits, which can directly affect your working capital!