The BC investment tax credit is a provincial tax credit paid out to BC technology companies as part of the Scientific Research and Experimental Development SR&ED program. SRED BC ITCs are fully refundable for Canadian Controlled Private Corporations. Refundable means the credits are paid out as cash regardless of a firm’s tax, revenue, or profit position. This makes the credits particularly valuable to start-ups and companies in cyclical industries. The BC ITCs are paid to IPCCs at a 10% rate of eligible expenditures.
There is a second popular, unrelated BC investment tax credit of 30% which is paid out to BC investors for investing in a venture capital corporation, VCC, or an eligible business corporation, EBC. This tax credit is fully refundable and for individual investors it is worth up to $120,000 per year for a $400,000 investment. It can be confusing those two completely unrelated programs give credits with the same name, BC ITCs.
The British Columbia SR&ED Tax Credit Program came into effect on September 1, 1999. SRED BC provides tax credits to qualifying corporations that carry on qualifying R&D activities in British Columbia. BC’s SRED program is relatively new compared to the federal SR&ED program which had been established 13 years prior in 1986. When it was introduced, the BC investment tax credit was 10% for CCPCs for up to $2M in qualifying expenditures. This expenditure limit was increased 50% in 2008 to a $3M of qualifying payroll, material, and subcontract costs. This increase brought BC’s expenditure limit in line with the federal expenditure limit. BC is one of the best provinces for SRED in Canada. Directionally, Ontario’s SR&ED credits are going in the wrong direction, from 10% to 8% for CCPCs in 2016.
SRED BC ITCs are also available to non-CCPC corporations in BC such as public firms and foreign-controlled corporations. These credits are awarded at 10% of expenditures, but the credits awarded are non-refundable. Non-refundable tax credits must be applied against BC corporate tax balances to turn them into cash. The credits can be used against tax balances in the current tax year or the 3 prior tax years. If there are no tax balances available to turn the credits into cash, they can be carried forward for 10 years. These rules are like the rules for federal non-refundable credits except those can be carried forward for 20 years. BC is a favorable jurisdiction for public company SR&ED vs Ontario. BC’s 10% credits stack up against a 3.5% credit available to public companies in Ontario called the ORDTC. Both the BC and ON credits are non-refundable.
BC Investment tax credits are defined in section 97 of the British Columbia Income Tax Act. BC ITCs are fully administered by the CRA since SR&ED harmonization so there’s no BC provincial contacts for questions about the program or how it works. As per the legislation, BC SRED credits run from 1999 to September 1, 2022. Hopefully, BC SRED credits will be extended before this deadline, otherwise BC will follow Alberta in going through a period where there are no provincial SRED credits awarded. This occurred in Alberta for the entirety of 2020. Qualifying expenditures once again count toward SRED in Alberta for expenditures after January 1, 2021, but the SRED hiatus means Alberta companies will lose between 12 months (December 31 YE firms) to 23 months (January 31 firms) of provincial SRED credits.
G6 Consulting can work with you to show you how SRED can accelerate your business goals and your business’ growth. We are not here to maximize your 2019 or 2020 FYE SRED claim. We are here to help you maximize the SRED funding you receive over the next ten years.
Check our our SR&ED overview page to learn more about SR&ED and how to qualify
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