SR&ED Overview

The SR&ED Program

The Scientific Research and Experimental Development Program, commonly known as SR&ED, is a tax incentive program offered by the Canadian government to companies that strive to innovate. The program aims to foster experimentation and technological advancement for the benefit of the Canadian economy. Most importantly, the SR&ED program provides market incentive for the creation of innovative products, services and processes.

The SR&ED program is exclusively managed by the CRA; however, most Canadian provinces have their own R&D tax programs. For eligible organizations, the additional provincial credits can be substantial.

The Most Generous R&D Tax Incentive in the World

The SR&ED program is among the most generous R&D tax incentives in the world, paying in excess of $4 Billion (CDN) to more than 20,000 eligible claimants every year. Based on program criteria, participants can receive significant cash refunds or tax credits to offset a portion of their qualified R&D expenditures.

While the program is generous in its application, the SR&ED filing process is extremely rigid and requires specific areas of expertise. To participate in the program, claimants must submit a SR&ED claim to the CRA within 18 months of their fiscal year end. Companies that fail to produce a properly documented claim by the deadline will be denied any tax credits. In addition to meeting the filing deadline, companies must show appropriate documentation and provide precise details while documenting claimed expenditures. With increased emphasis on program compliance, incomplete or poor submissions will not be approved by CRA administration.

As a result, a majority of claimants are discouraged by the rigid nature of the SR&ED program. Confusing legislation and time-draining report preparation can outright deter businesses from program participation.

Did You Know?

Canadian taxpayers can recover up to 82% of their expenditures through federal and provincial R&D tax programs. Tax credits are dependent on company location, corporate structure, taxable income and taxable capital.