What is SR & ED?
What is SR&ED?
Scientific Research and Experimental Development (SR&ED)
By design the SR&ED program was originally created to measure levels of innovation within Canadian borders – a way for the Canadian government to ask for information from private companies by offering a tax incentive against taxes payable for those willing to offer up their current in-house innovations and secrets.
The SR&ED program in Canada is one of the most heavily subsidies R&D programs in the world, with many other countries in surrounding continents modeling their R&D programs on ours.
Today the SR&ED program helps many companies in Canada stay competitive, efficient and for some afloat.
The SR&ED program is an expenditure based tax credit program that provides a refund or tax credit to various business entities.
Last year R&D expenditure In Canada reached approximately $14.5 billion dollars. The Canada Revenue Agency awarded $5 billion dollars to eligible companies in Canada through the SR&ED program.
There are three tests that qualifying projects have to meet in order to become eligible.
- There has to be a technical advancement
- There has to be a technical uncertainty
- The work performed to overcome the uncertainty has to be pursued through systematic investigation.
The idea of the program is to subsidize the time it takes to increase a firm’s knowledge base through the above criteria. If your company has projects that increase your firm’s knowledge base and meet the above 3 criteria, then your company can apply for a refund or tax credit against taxes payable for capital already spent on those projects.
What’s in it for you?
If you are involved in any of the above mentioned projects or find that you have a project that meets the eligibility requirements and you are a Corporation located in Canada, depending on your province you may be eligible for a CASH REFUND or TAX CREDIT of up to:
| CASH REFUND | OR/A | TAX CREDIT: |
| 68% of Qualifying Labour Expenditure | 33% of Qualifying Labour Expenditure | |
| 42% of Qualifying Material Costs | 20% of Qualifying Material Costs | |
| 42% of Qualifying Sub Contract | 20% of Qualifying Sub Contract |
Tax Credits may be applied against taxes payable and may be carried forward for up to 20 years or used to reduce taxes payable from previous years no more than 3 years back