It pays to do research in Canada.
The Scientific Research and Experimental Development (SR&ED) is a tax incentive program offered by the Canadian government that encourages companies to conduct scientific and technological research. With SR&ED, your company can reap the rewards of research or developing new products in Canada.
Tax incentive programs like SR&ED can often be complicated, confusing and difficult to navigate, but don’t worry, Waterloo EDC has plenty of experience. We’ve pulled together a comprehensive overview of the program that outlines which companies and projects are eligible and explains how coming to Canada and applying for SR&ED can make a huge impact on your company’s success.
What is SR&ED?
The SR&ED program offers tax incentives for businesses in Canada that perform basic research, applied research or experimental development in the fields of science and/or technology. Each year, the SR&ED program provides $3 billion in tax incentives to over 20,000 applicants. It is the largest research and development (R&D) program in Canada.
Which companies are eligible?
Any private company that invests in research and development in Canada can take advantage of SR&ED. Proprietorships and members of partnerships can also apply.
Which R&D projects are eligible?
To meet the eligibility requirements, your company must be conducting experimental or analytical scientific research that satisfy three main criteria. Your research project must:
- Have a technological uncertainty – At the onset of your project, keep in mind that a technological uncertainty means that there is no obvious or readily accessible solution to the problem you are attempting to solve.
- Conduct a systemic investigation – Research projects (almost always) hit hurdles that are not easily overcome. By conducting a systematic investigation, your company will use the results and knowledge gained from these failed approaches to inform your next attempted solution.
- Achieve a technological advancement – Achieving a technological advancement isn’t nearly as daunting as it sounds. If your project is successful in solving a technological uncertainty, you have evidently achieved a technological advancement. If your project is unsuccessful, you have still achieved a technological advancement – only by demonstrating that the techniques you used were not feasible in solving that problem/uncertainty.
How can SR&ED help your company?
The SR&ED program rewards companies for conducting research and development in scientific and technological fields in Canada with a 15% federal tax credit. Canadian-controlled private corporations (CCPCs) can earn an enhanced rate of 35% up to $3 million.
With these financial rewards, your company can fund innovative ventures in science and technology, invest in future SR&ED projects and give yourself a competitive edge. SR&ED is an invaluable tool to advance your company’s R&D capacities and accelerate your success.
Plus, by locating in Ontario, Canada, your company can take advantage of other tax credits in addition to SR&ED and save up to 60% on research, development and innovation.
What does the application process include?
To claim your SR&ED tax credit, you must file an income tax return and include a completed Form T661 to provide general, project, financial and statistical information.
When it comes to receiving government support for your business, we can help. Waterloo EDC can help you identify the programs that align with your goals, guide you through the submission process, and write letters of support to bolster your funding application or leverage our connections with government partners to maximize your chances of success, when appropriate.