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Scientific Research and Experimental Development Tax Credit Program
From Wikipedia, the free encyclopedia
The Scientific Research and Experimental Development Tax Incentive Program (often referred to as simply SR&ED or SRED) provides tax incentives (in the form of tax credits and/or refund) to Canadian businesses to support applied research and experimental development conducted in Canada.
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Introduced in the 1980s, the SR&ED program is intended to encourage businesses of all sizes -- particularly small and start-up firms -- to conduct SR&ED that will lead to new, improved, or technologically advanced products or processes. As Canada's largest federal program in support of industrial R&D, SR&ED receives more than 11,000 claims annually for approximately $1.8 billion in tax credits.[1]
SR&ED expenditures (already deducted against revenue) may qualify for investment tax credits (i.e., a reduction in income taxes payable), cash refunds, or both. Qualified expenditures may include wages, materials, machinery, equipment, some overhead, and SR&ED contracts from the following activities:[2]
- experimental development
- applied research
- basic research
- support work
In order to claim such expenditures, an assessment on scientific or technological eligibility of the claimed activities need to be performed, according to three criteria:[3]:
- Scientific or technological advancement
- Scientific or technological uncertainty
- Scientific and technical content
The Ministry of Finance is responsible for the legislation that governs the SR&ED program, while the Canada Revenue Agency is responsible for its administration.
Federally, the maximum Investment Tax Credit (ITC) depends on the company's legal status and amount of qualified expenditures for SR&ED carried out in Canada.[2]
- Canadian-controlled private corporation (CCPC): the ITC is 35% of the first $2 million in qualified expenditures, and 20% on any excess amount.
- Other Canadian corporations, proprietorships, partnerships, and trusts: the ITC is 20% of all qualified expenditures.
In addition, each province or territory may also provide provincial or territorial tax credits (subject to a cap) to qualifying corporations carrying out SR&ED in their respective province or territory:
| Province/Territory | Rate |
|---|---|
| Alberta | |
| British Columbia[4] | 10% |
| Manitoba[5] | 20% |
| New Brunswick[6] | 15% |
| Newfoundland and Labrador[7] | 15% |
| Northwest Territories | |
| Nova Scotia[8] | 15% |
| Nunavut | |
| Ontario[9] | 20% |
| Prince Edward Island | |
| Quebec[10] | 15% |
| Saskatchewan[11] | 15% |
| Yukon Territory[12] | 20% |
Provinces and territories may offer alternative or supplemental investment programs. Examples:
- Ontario small businesses may also claim the 10% Ontario Innovation Tax Credit.[9]
- Alberta offers funding through its science and research investments grant program.[13]
- Prince Edward Island offers grants (non-repayable contributions) under various funds.[14]
- Northwest Territories and Nunavut provide a 15% tax credit under the Risk Capital Investment Tax Credits Act.[15]
- Scientific Research and Experimental Development Tax Incentive Program
- Provincial and Territorial Government R&D Programs
- Income Tax Act
- ^ Strategic Business Plan 2005. Retrieved on 2006-09-02.
- ^ a b About Our Program. Retrieved on 2006-09-02.
- ^ IC86-4R3, Scientific Research and Experimental Development Information Circular (1994-05-24). Retrieved on 2007-08-14.
- ^ Scientific Research and Experimental Development Tax Credit. Retrieved on 2006-09-03.
- ^ Manitoba Finance. Retrieved on 2006-09-03.
- ^ RESEARCH AND DEVELOPMENT TAX CREDIT. Retrieved on 2006-09-03.
- ^ Finance - Scientific Research and Experimental Development. Retrieved on 2006-09-03.
- ^ Nova Scotia Research and Development Tax Credit. Retrieved on 2006-09-03.
- ^ a b ONTARIO BUSINESS-RESEARCH INSTITUTE TAX CREDIT. Retrieved on 2006-09-03.
- ^ Additional Tax Credit for Scientific Research and Experimental Development. Retrieved on 2006-09-03.
- ^ Research and Development Tax Credit. Retrieved on 2006-09-03.
- ^ Yukon Research and Development Tax Credit. Retrieved on 2006-09-03.
- ^ Alberta Science and Research Investments Program (ASRIP). Retrieved on 2006-09-03.
- ^ TechPEI - Research and Development Initiative. Retrieved on 2006-09-03.
- ^ The Risk Capital Investment Tax Credits Act. Retrieved on 2006-09-03.