SR&ED stands for Scientific Research and Experimental Development. The Canada Revenue Agency (CRA) offers tax credit incentives and refunds for companies that perform Research and Development in Canada. The SR&ED program was created in the mid-1980’s to encourage technical development in Canada, and each year it provides an average of over $3 billion to Canadian companies.
If you are developing a new technology, improving existing technology, products or processes, you could be eligible to receive tax credits or cash refunds under the SR&ED program. While many other countries have similar programs, Canada’s SR&ED program is one of the more lucrative of tax-incentive programs for companies performing research and development.
Benefits of SR&ED
Qualified Canadian Controlled Private Corporations (CCPC’s) can receive up to 35% back of eligible expenditures incurred in the development of new or improved products or processes. Foreign-owned or public corporations can qualify for a 15% tax credit on eligible expenditures.
Most Canadian provinces offer additional tax credits on qualified SR&ED expenditures. Depending on the province, SR&ED claimants can earn additional provincial SR&ED tax credits. Read more about provincial tax credits to find out your province’s rate of return.
The funds that you receive from the SR&ED program can be invested back into your business in the form of new equipment, new hires, expanding your facilities, taking on more challenging projects, or paying down debts.
How SR&ED Tax Credits are Calculated
The following charts show the value of tax credits from an example set of expenditures:
Example of SR&ED Expenditures
|Calculation of Qualified SR&ED Expenditures||Expense||SR&ED Eligible|
|Overhead (via Proxy: 55% of T4 Labour)||$275,000|
|Materials Destroyed + Transformed||$105,000||$105,000|
|Arms-length Subcontracts (80%)||$150,000||$120,000|
|Total Qualified Expenditures||$1,255,000||$1,000,000|
Example of Calculating Tax Credit in Ontario (CCPC)*
|Ontario – OITC (10%/8%***)||$100,000||$80,000|
|Ontario – ORDTC (4.5%/3.5%**)||$40,500||$32,200|
|Federal – ITC (35%)||$300,825||$310,730|
|Total SR&ED Benefit For You (~44.1%/42.3%)||$441,325||$422,930|
|* CCPC – Canadian Controlled Private Corporation
** ORDTC was reduced from 4.5% for expenditures incurred after June 1, 2016
*** OITC was reduced from 10% for expenditures incurred after June 1, 2016
Example of Calculating Tax Credit in Ontario (non-CCPC)
|Ontario – ORDTC (4.5%/3.5%**)||$45,000||$35,000|
|Federal – ITC (15%)||$143,250||$144,750|
|Total SR&ED Benefit For You (18.8%/18%)||$188,250||$179,750|
|** ORDTC was reduced from 4.5% for expenditures incurred after June 1, 2016|
How NorthBridge Will Assist With SR&ED and Other Funding Programs
NorthBridge is a full-service professional engineering firm, which excels at working with you to make sure that you receive the best value from your SR&ED claim. We employ full-time engineers to assure the thoroughness of every claim that we complete, and that all eligible projects are included with your SR&ED claim.
NorthBridge has over 20 years of experience assisting companies with government funding programs. We will:
- Listen and discuss past, present and future project activities.
- Research and identify the appropriate and optimal government grant, tax incentive, loans, as well as private financing opportunities.
- Take a hands-on approach to the application process and address relevant program objectives and criteria.
- Become an in-house project manager for all types of government funding.
- Interview the key employees and ask specific questions in order to make the right funding decisions.
- Assist in writing the application and preparing all supporting documentation.
- Assist with government reporting requirements.
To arrange for a free, no obligation consultation with one of our government funding experts contact us at: firstname.lastname@example.org