Tax Incentives

What are the SR&ED Tax Incentives?

The Scientific Research and Experimental Development (SR&ED) tax incentives are the largest program by the Government of Canada to support research and development. It provides more than $3 billion Canadian dollars in tax incentives every year to over 16,000 businesses. This incentive comes in three forms:

  • Non-Refundable Investment Tax Credit (ITC) to reduce taxes owed in the year.
  • If the tax payable is reduced to $0, the remainder of the non-refundable ITC can be used to recover taxes paid in the last three years or to reduce tax that may be owed over the next 20 years.
  • Refundable ITC that can fund expenditures relating to Research and Development (R&D).

How You Receive these Tax Incentives

Your tax incentives under the SR&ED program will look like one of the following:

  • Deductions against income.
  • Investment tax credits (ITCs)
    • Refundable
    • Non-Refundable

The value of these ITCs can range from at least 15% to a max of 35% on qualified SR&ED expenditures. Excess ITCs in the current year may result in a refund and unused ones can be used for the prior 3 years or future 20 years.

Tax Incentives

Eligibility for the SR&ED Tax Incentives

The work must meet the following criteria:

  • The work is conducted for the advancement of scientific knowledge or to acheive a technological advancement.
  • Systematic investigations or searches in science/technology via experiment/analysis.

Work Categories that are Eligible

  • basic research
  • applied research
  • experimental development

Work that Directly Corresponds or Supports Eligible Work Categories

  • engineering
  • design
  • operations research
  • mathematical analysis
  • computer programming
  • data collection
  • testing
  • psychological research

Work that is Excluded from SR&ED Tax Incentives

  • market research or sales promotion
  • quality control or routine testing of materials, devices, products or processes
  • research in the social sciences or the humanities
  • prospecting, exploring or drilling for, or producing, minerals, petroleum or natural gas
  • commercial production of a new or improved material, device or product
  • the commercial use of a new or improved process
  • style changes
  • routine data collection

Check Your Eligibility and Start Filing Your SR&ED Claim Here

Find out more information on the Government of Canada’s website under the CRA’s section about Scientific Research and Experimental Development (SR&ED) tax incentives by clicking here.