Scientific Research and Experimental Development (SR&ED)

To qualify to receive the scientific research and experimental development (SR&ED) tax incentive, the work, for the most part, must be conducted in Canada and must be either basic research, applied research or experimental development.

• Basic research: This is work carried out to advance scientific knowledge without a practical application in view. It is usually done in universities or research institutes.
• Applied research: This is also work carried out to advance scientific knowledge but, unlike basic research, it is done with a specific practical application in view.
• Experimental development: This work is carried out to achieve technological advancement. It is also by far the most common type of SR&ED work:
  • It means that you are generating information or knowledge to advance your scientific or technological knowledge base – This will help you to develop new products or processes or improve existing ones
  • Developing something new or improving something does not always mean that a technological advancement is being sought – Ask yourself: What technological uncertainties did I encounter when I tried to develop or improve the material, device, product or process?

The SR&ED work must be a systematic investigation or search through experiment or analysis. This means that each approach you take to resolve your uncertainty should be a planned experiment based on an idea or a concept. You start with a problem that you cannot solve with your existing scientific or technological knowledge base. Then, you suggest new ideas for solving that problem and you test them. This will eventually lead you to increase your scientific or technological knowledge base. Generally, your work qualifies as SR&ED if you are doing a systematic investigation or search, through experiment or analysis, to advance science or technology.

The following types of work are not SR&ED:

• market research or sales promotion
• quality control or routine testing of materials, devices, products or processes
• research in social sciences or the humanities
• prospecting, exploring or drilling for, or producing minerals, petroleum or natural gas
• commercial production of a new or improved material, device, product or process
• style changes
• routine data collection

You can also read our Eligibility of Work for SR&ED Investment Tax Credits Policy, which explains what work meets the definition of SR&ED.