SR&ED in the Information Technology Industry
Eligible sub-sectors include:
- Data transmission protocols
- Firmware development
- Computer networking
- Artificial intelligence
- Neural linguistics
- Computer modeling & simulation
- Software development
- Business intelligence systems
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!
You May Be Eligible If:
- You employ in-house software developers
- You have developed a proprietary platform or application
- You have integrated legacy systems or databases into your platform
- You have improved the performance or scalability of an existing system to meet constraints
- You have developed new methods of capturing, transmitting, storing, retrieving, manipulating, search, or securing data
- You have developed a gaming engine