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SR&ED stands for scientific research and experimental development. As an incentive to spur the growth of start-up companies and innovations, both the Federal and Provincial governments have implemented programs which provide a way for companies to recover a generous portion of their allowable SR&ED expenditures.

These programs typically result in savings to private companies through investment tax credits (ITCs) and/or current deductions from income. Like many of our clients, your company may be eligible to receive a cash refund on a portion of its SR&ED expenditures.

Who Qualifies?

Generally, a Canadian-controlled private corporation (CCPC) can earn an investment tax credit (ITC) of 35% up to the first $2 million of qualified expenditures for SR&ED carried out in Canada, and 20% on any excess amount. Other Canadian corporations, proprietorships, partnerships, and trusts can earn an ITC of 20% of qualified expenditures for SR&ED carried out in Canada.

Generally, a CCPC with a taxable income in the immediately preceding year that does not exceed the business limit may receive a portion of the ITC earned as a refund, after applying these tax credits against taxes payable.

The ITC earned by a Canadian corporation that is not a CCPC is non-refundable, but may be used to reduce any taxes payable. The ITC earned by a proprietorship or certain trusts may be partially refunded after applying these tax credits against taxes payable.