What are SR&ED tax incentives
If your business is engaged in scientific research and experimental development (SR&ED), you may be able to earn tax incentives that reduce your income tax payable.
How your business can benefit
Corporations, individuals, trusts, and partnerships that conduct SR&ED work in Canada may be able to:
- Claim a deduction against income
- Earn an investment tax credit (ITC) that they can apply against their income tax payable
- Partnerships allocate the ITC earned to their eligible partners
How certain relationships affect the small business deduction and SR&ED investment tax credits
Claim a deduction against income
To claim a deduction against income, you will need to calculate the allowable SR&ED expenditures that you incurred in the year.
You can then calculate your pool of deductible expenditures and use any balance to reduce your net income for the current year or a future year.
Earn an investment tax credit (ITC)
You may earn an ITC to reduce your income tax payable for the year.
Your business may earn the credit at a basic rate of 15%. Some corporations may claim an ITC at the enhanced rate of 35%.
Some businesses may also earn a refundable ITC.
Optional pre-claim approval
Whether your business is already engaged in scientific research and experimental development (SR&ED) or is planning to undertake such activities, it may qualify for SR&ED pre-claim approval. Before you start any work or incur any costs, the CRA will assess your pre-claim approval application and determine if your project will meet the definition of SR&ED.
The CRA will not assess expenditures during the pre-claim approval process. After you file an SR&ED claim, if your claim only contains projects that received pre-claim approval, the CRA may carry out an accelerated 90-day expenditure only review. If your claim contains additional projects or significant material differences in projects that received pre-claim approval, claims selected for review will be processed according to the standard SR&ED processing times.
You can apply for pre-claim approval for up to 3 projects, and each approval is valid for a duration of up to 3 years.
Applying for pre-claim approval is optional. You can still claim a SR&ED tax incentive if you decide not to apply for pre-claim approval.
Other government funding for R&D
Other government R&D funding and assistance will not prevent your work from being eligible for SR&ED tax incentives, but they will reduce the amount of ITC you can earn.
For example, if you receive NRC IRAP, it will reduce the amount of ITC you can earn.
Provincial and territorial R&D tax credits may also be available, although they will reduce the expenditures you can claim for SR&ED.
You will need to report any funding or assistance you receive in your SR&ED claim.
To learn more about other government funding and assistance, review:
Get support understanding SR&ED
SR&ED webinars
Attend a webinar to learn more about SR&ED tax incentives.
SR&ED outreach
Request a visit from our outreach team to arrange presentations for your business, to speak at an event, or to provide products tailored to your business.
Contact us
Call us if you have any questions about the SR&ED tax incentive program.