What is SR&ED?
SR&ED stands for Scientific Research and Experimental Development (and is commonly pronounced "SHRED").
It is a tax incentive program offered by the Canadian Government to companies which strive to innovate. The aim of the program is to foster experimentation and technological advancement for the benefit of the Canadian economy.
Although the program is administered by the CRA (Canadian Revenue Agency), almost all provincial governments participate as well by adding to the federal credit.
The Canadian SR&ED program is the most generous of its kind in the world, paying in excess of CAN$2 Billion annually to over 16,000 participants.
Canadian taxpayers can recover up to 82% of their expenditures under the SR&ED program ! The amount that they can recover depends on their:
- location within Canada
- ownership (Canadian vs. Foreign, Private vs. Public)
- taxable income of the associated group (in the prior fiscal year), and
- size (amount of taxable capital)
Eligible expenditures include:
- salaries and wages, including a bump-up for overhead
- materials consumed and destroyed
- subcontracts and
- capital equipment
Most Canadian provinces offer additional incentive programs to complement the federal ITC. Click here to review the rates applicable to you.
Most companies in manufacturing, software & IT, biotechnology, food & beverage, chemicals & plastics, oil & gas, and mining qualify for the SR&ED tax credit.
The key criteria are that
- i) technologically challenging work was conducted,
- ii) systematic investigation was undertaken to solve a problem, and
- iii) some degree of technological advancement was achieved.
The SR&ED tax credit is an entitlement under the Income Tax Act and not a grant. It is fiscal-year driven and very strict filing deadlines apply. With every professionally prepared submission, BeneFACT ensures that claims are always maximized.
SR&ED expenditures are not only deductible as a regular business expense, but also generate substantial tax credits that can range from 20% of expenditures to 82%!
Many of our clients have received a cash refund - even if no taxes were paid.
Call us at 416-360-SRED(7733) for advice or to arrange a free, no-obligation consultation.