Tax Credits for Research and Development Available in Canada
In Canada, tax credit support is available from the federal government and from a number of provinces.
The Federal Program:
The Investment Tax Credit for Scientific Research and Experimental Development (ITC-SRED)
This program is among the most generous of its kind in the world, and can result in cash payments of up to 35% of total qualified expenditures. This
highest level of reward is granted to Canadian Controlled Private Corporations (CCPCs). Other companies are eligible for a 20% credit. Credits may be
claimed for one prior year in addition to any current claims.
The SR&ED credit program is authorized under Section 248 of the tax law and is governed by Regulation 2900. In order to qualify, a company must show that the projects claimed involved one or more intended technological advances (regardless of whether they were actually achieved). The company must then also show that there was some degree of technological uncertainty involved in the effort to achieve the desired technical goals. Finally, evidence of experimentation and the application of a scientific method must be presented.
The SR&ED credit may be claimed on form T661. A new form T661 was recently released by the Canada Revenue Agency and applies to all fiscal years ending on or after January 1, 2009. Although the purpose of T661 is the simplification of SR&ED filing, under the new procedures there are some changes that will require a deep understanding of the specific requirements in order to avoid the denial of your SR&ED claim.
Taxpayers will be required to file form T661 for all projects instead of the former requirement to file the top twenty project descriptions. Additionally, technical descriptions must now be written using a limited number of words. Technological advancement and technological uncertainty sections must be 350 words or less and the description of work section will be limited to 700 words. The form also introduces a number of new terms that are defined in a new guide and a checklist of prescribed information designed to ensure that the company understands the CRA documentation requirements has been added.
Provincial Programs:
Several provinces offer supplemental support for R&D conducted locally. These programs change frequently.
So what can we do for you?
We can help you to navigate the complex rules involved with filing your T661, and our dedicated expertise can help you to avoid denied SR&ED claims.
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