Other Government Programs
The Scientific Research & Experimental Development (SR & ED) tax incentive program is the largest single source of federal government support designed to encourage research and development (R&D) in Canada.
The objective of the SR & ED program is to deliver SR & ED tax incentives in a timely, consistent and predictable manner, while encouraging businesses to prepare their claims in compliance with tax laws, policies and procedures.
The SR & ED program is available to any business operating and carrying out research and development in Canada. Certain expenditures for SR & ED, performed outside of Canada, are also permitted.
Any business that is involved in basic or applied research, or in advancing technology in order to improve or develop new materials, devices, products or processes may be eligible under the SR & ED program.
The definition of "scientific research and experimental development" given in subsection 248(1) of the Income Tax Act can be summarized as:
“the systematic investigation or search carried out in a field of science or technology by means of experiment or analysis … to advance scientific knowledge or to achieve technological advanceciment.”
The work must fall into one of the following categories:
• Experimental development - This is the work done to achieve technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes;
• Applied research - This is work done to advance scientific knowledge with a specific practical application in view;
• Basic research - This is work done to advance scientific knowledge without a specific practical application in view;
SR & ED can also include other work that is directly in support of the experimental development, applied research or basic research. This support work includes only the following eight specific types:
• engineering
• design
• operations research
• mathematical analysis
• computer programming
• data collection
• testing
• psychological research
The support work to be claimed must correspond to the needs of the experimental development, applied research or basic research performed.
If you are a Canadian Controlled Private Corporation (CCPC), you may receive a refundable investment tax credit (ITC) of up to 35% on your qualified SR & ED expenditures. You must first apply these ITCs against taxes payable in the year of the claim. The balance may be refunded. The rate of refund is based on your taxable income and taxable capital in the previous year and an expenditure limit.
For other corporations, the ITC is 20% of qualified current and capital SR & ED expenditures. The ITC may be applied to taxes payable and is not refundable.
Certain work is not eligible for benefits under the SR & ED program, including:
• market research or sales promotion;
• quality control or routine testing of materials, devices, products or processes;
• research in 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, or the commercial use of a new or improved process;
• style changes; and
• routine data collection.
The vast majority of Chatham-Kent firms participate in this program, which provides a distinct competitive advantage to businesses located in Canada.
You can obtain more information about the SR & ED program, including upcoming seminars and access to forms and publications via the Canada Revenue Agency's SR & ED website at www.cra.gc.ca/sred or contact your nearest co-ordinating tax services office by visiting the section titled "SR&ED contacts" within the CRA site.
For more information on establishing your business in Chatham-Kent, please contact Chatham-Kent Economic Development Services at 1.866.542.5994 or 519.351.7700, or by email to CKeds@chatham-kent.ca