Scientific Research & Experimental Development (SR&ED) is a tax incentive program administered by Canada Revenue Agency (CRA), that supports businesses conducting research and development (R&D) activities in Canada.
Small and Medium sized businesses that undertook R&D in Canada, for the purpose of scientific or technological development can apply. Please note if your business is a:
If your business is eligible to apply for such incentives, then the program can provide tax credits that are refundable, non-refundable, and/or a combination of these, which can:
Three criteria a business must meet to qualify for SR&ED tax credits:
Business under any industry can apply for SR&ED credits, but typically we find popularity in:
A SR&ED claim must be filed 18 months following the fiscal year in which the research and development was conducted.
What SR&ED Expenditures are Eligible?
What SR&ED Expenditures are NOT Eligible?
There is no predefined maximum amount, all expenditures are eligible to be submitted as long as they meet the SR&ED program criteria.
For claims submitted with the T2 corporate return, the CRA’s service standard timelines are between 90 to 120 days to process the claim. Meanwhile, if a T2 is amended with SR&ED data, then it can take between 180 to 240 days.
The documentation should demonstrate the project activities, data collection and analysis. It should be contemporaneous and highlight technical challenges. In such instances, these documents will also be associated with expenditures related to eligible SR&ED activities.
Below are examples of eligible documents:
For additional information on how to support your claim, click here.
No. SR&ED eligible projects do not necessarily involve cutting edge innovation. They do include experimental efforts that take place during the development or improvement of products and/or processes. Aiming at incremental and minor improvements can qualify for SR&ED.
The success of the project does not affect eligibility. An attempt to resolve technological uncertainty is sufficient, along with satisfying CRA’s five questions:
Claiming SR&ED Tax Credits in the Software Industry
What Software Projects Qualify?
What Software Projects do not Qualify?
Canadian software developers can fund up to 64% of their research and development costs.
If you answer “yes” to the following five questions, your claim is likely to be approved
A valid claim will be based upon:
The three key criteria must ALL be met. A company needs to show that their work attempts:
1. Technological Advancement
2. Technological Uncertainties
3. Systematic Investigation
It is important to keep documentation that proves technological advancement, technological uncertainties and systematic investigation.
Documentation for technological advancement includes providing details of steps taken in the research process. The steps should include:
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