R&D Tax Credit: What Is It & Who Can Use It? (Views: 4136)
Thu, 04 Feb 2016
Scientific Research & Experimental Development Tax Credits (commonly referred to as SR&ED or R&D Tax Credits) are tricky to navigate because of the complex laws and precedence behind them and their broad application across sectors, so we created a basic guide below to assist you.
What Is The R&D Tax Credit?
The objective of the R&D tax credits is to incentivize the R&D being undertaken across Canada. One major feature of the credit program that new businesses often overlook is that most businesses are eligible to receive a cheque from the government simply by incurring eligible R&D expenditures, regardless of whether the business has any revenue or taxes owing. The R&D Tax Credit is administered by the Canada Revenue Agency and, depending on the province, provincial tax authorities.
What Qualifies for the R&D Tax Credit?
For a project to qualify for the credit, three conditions must be met:
- A project must attempt technological advancement in certain areas of science;
- Achievement of a project’s goal must have an element of technological uncertainty; and
- A systematic approach must be used for the project.
How Much Can I Receive?
The best-case scenario, if you operate a Canadian Controlled Private Corporation (CCPC) is as follows:
- In Quebec, you may receive a refund of up to 73% of R&D salary expenditures (after the first $50,000 spent);
- In Ontario, that refund can be 68% of R&D salary expenditures and does not require a minimum salary expenditure level like Quebec; and
- In British Columbia, you may be eligible for a 64% refund on R&D salary expenditures, also without a minimum expenditure requirement.
Similarly, refunds can be obtained in other provinces across Canada.
What You Need to Know:
- There is an 18 month hard deadline for submission of an R&D Tax Credit application, starting from the end of a company’s fiscal year;
- You must set-up and maintain real-time “contemporaneous” documentation system to support your claim;
- While there have been many changes to the program over the last few years, the basic laws relating to eligibility have not changed. That said, it is best to consult with an expert before making any significant assumptions.
For a more information or case-specific estimate, you can contact Sahar Ansary M. Eng. (514 840-0938) of R&D Partners, a group which assists startups, SMEs and large corporations in maximizing their R&D Tax credit returns and simplifying their life.
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