How your business can benefit from the SR&ED tax incentives

What are the SR&ED tax incentives

The Scientific Research and Experimental Development (SR&ED) tax incentives encourage businesses of all sizes and in all sectors to conduct research and development (R&D) in Canada.

Depending on the size and type of business, SR&ED incentives are:

Whatever eligible SR&ED work you are doing, you can use your pool of deductible SR&ED expenditures to reduce your net income for tax purposes in the current year or deduct them in a future year.

Your ITCs will be at least 15% and can be as much as 35% of your qualified SR&ED expenditures. You can use the ITCs to reduce your income tax payable for the year. If you have excess ITCs in the current year, you may also get a refund. If you have any unused ITCs, you can carry them back 3 years or forward 20 years and apply them against tax payable for other years.

Corporations, individuals, trusts and members of a partnership can use these Government of Canada incentives.

What your business can earn

How much your business can claim depends on the type of business structure and the qualified SR&ED expenditures your business has.

Canadian-controlled private corporations

Generally, most Canadian-controlled private corporations (CCPC) can earn a refundable ITC at the enhanced rate of 35% on qualified SR&ED expenditures up to their expenditure limit for the tax year (maximum expenditure limit is $3 million). You can also earn a non-refundable ITC at the basic rate of 15% on an amount over your expenditure limit. However, if a CCPC also meets the definition of a qualifying corporation, 40% of the ITC earned at 15% can be refunded.

Other corporations

You can claim a non-refundable ITC at the basic rate of 15% on qualified SR&ED expenditures. You can use the ITC to reduce tax payable.

Individuals and trusts

Individuals (proprietorships) and trusts can claim a refundable ITC at the basic rate of 15% on qualified SR&ED expenditures. You first must apply the ITC against tax payable before the CRA can refund 40% of the unclaimed balance of ITCs earned in the year.

Members of a partnership

Since a partnership is not a taxpayer, you cannot earn an ITC. In general, the ITC is calculated at the partnership level then allocated to eligible members (individuals, corporations or trusts). If you are considering submitting a partnership claim for SR&ED, read the SR&ED Claims for Partnerships Policy.

Get in touch for more information

If you want more information about SR&ED, you can attend an information seminar, contact our SR&ED Outreach Program or contact us with any questions.

SR&ED information seminars

Attend virtual information seminars on a variety of topics to help businesses gain a deeper understanding of the SR&ED Program. Find out about upcoming SR&ED information seminars.

SR&ED Outreach Program

The Outreach Program is an initiative that seeks to promote and educate potential claimants about the SR&ED tax credit. Learn more about the SR&ED outreach program.

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