SR&ED TAX RETURN
The Scientific Research and Experimental Development (SR&ED) Grant Program is a federal tax incentive program aimed to encourage Canadian firms of all sizes and sectors to do industrial R&D in the country.
The Canada Revenue Agency (CRA) administers the program, which provides SR&ED grant tax incentives in a timely, consistent, and predictable manner while encouraging businesses to prepare claims under Canadian tax laws and CRA policies and procedures. This government grant can help many firms working on advancing science and technology who are looking for a research grant to fund their project in Canada. Whether you are an IT firm, a food processing company, engineering company, your business may be eligible to apply for SR&ED.
How May SR&ED Tax Incentives Help Businesses?
The SR&ED tax incentives have two main tax advantages:
- You have the option of pooling your SR&ED expenses and deducting them this year or keeping them and deducting them later.
- The SR&ED investment tax credit (ITC) can be earned and used to lower your taxable income. The CRA may be able to reimburse the remaining ITC in some circumstances.
Your ITC rate will be at least 15% and up to 35% of your qualified SR&ED expenses, depending on the type of eligible SR&ED work you conduct. If you have any unused ITC rates, you can carry them back three years or forward 20 years to offset tax owed in subsequent years.
Which Businesses Can Earn This?
In general, a refundable ITC rate of 35% can be earned by a Canadian-controlled private corporation (CCPC) on qualified SR&ED expenditures of $3 million. On amounts over $3 million, a CCPC can also get a non-refundable ITC rate at the basic rate of 15%. However, if you are a CCPC that also fulfills the definition of a qualifying corporation, you will be eligible for a refundable ITC rate of 15% on amounts over $3 million, with 40% of the ITC rate refundable.
Individuals And Trusts
On qualified SR&ED expenditures, individuals (sole proprietorships) and trusts can earn a refundable ITC at the basic rate of 15%. Before the CRA can refund 40% of the unclaimed balance of ITC earned in the year, you must first apply the ITC against tax due.
The SR&ED expenditures and investment tax credit must be reported within 12 months of the due date of your business income tax return. You can learn more about the SR&ED reporting deadlines from the SR&ED Filing Requirements Policy.
Members Of a Partnership
You can't get an ITC because a partnership isn't a taxpayer. The ITC rate is usually calculated at the partnership level and then distributed to qualifying members (individuals, corporations, or trusts). Read the SR&ED Claims for Partnerships Policy if you're thinking about submitting a partnership claim for SR&ED.
Qualified SR&ED expenditures can earn you a non-refundable ITC at the baseline rate of 15%. You can use the ITC rate to lower your tax bill.
How Can Businesses Take Advantage of the SR&ED Tax Breaks?
The SR&ED expenditures and investment tax credit must be reported within 12 months of the due date of your corporation's income tax return.
How We Can Help
For enterprises large and small, our consultants specialize in Scientific Research and Experimental Development (SR&ED) tax credits and other government incentives across all industries. Along with the valuable advice you will get, we will also help you out with filling the forms. You will have absolutely nothing to worry about!