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. Detailed technical descriptions for each project claimed are required as an addendum to this form. Each claim is subjected to independent financial and scientific review, and so the quality of the documentation is a key factor in the success of any claim.
Provincial Programs:
Several provinces offer supplemental support for R&D conducted locally. These programs change frequently.
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