SRED Canada, SR&ED Canada, and Tax Incentives Canada are common topics that refer to the largest tax incentive program in Canada. SRED Canada is a research and development (R&D) tax credit program that awards companies for conducting scientific research and experimental development work in Canada. Although basic research is a part of the program, experimental development accounts for over 90% of credits distributed through the program. Many companies do not fully understand that they qualify until they talk to an expert. In general, any work that is not routine activity and carries a risk of failure may qualify for SRED tax credits.
The largest industry tax incentive in Canada is the Scientific Research and Experimental Development (SR&ED) credit. A qualifying CCPC (Canadian Controlled Private Corporation), can qualify for large cash credits from the government. This means that the credits will come to you as a direct deposit from the CRA and not just be used to lower taxes payable.
Other smaller industry incentives exist in the following fields;
Foreign tax credits are another smaller tax incentive program in Canada. Generally, income or profits taxes paid to foreign governments are eligible for a credit against Canadian income taxes payable. Foreign income and foreign taxes must be calculated in CAD. The CRA instructs you to use the exchange rate in effect on the day you received these amounts if not CAD amounts. In general, the purpose of these credits is only to reduce the Canadian tax on foreign source income that is subject to tax in the foreign country. Some other important notes are that foreign business income/loss is calculated for each foreign country in which a branch is located. Additionally, tax treaties with other countries may affect weather you are eligible for this credit.
Smaller regional incentives are another tax incentive program in Canada. In certain areas of the country a 10% federal investment tax credits is available for certain forms of capital investment. This is a mostly non-refundable credit that reduces federal income tax payable in a given year. Unused ITC’s can be carried back by 3 years or carried forward by 20 years. Furthermore, certain provinces and territories may have incentives to encourage corporations to locate in a certain region. An example of this is income tax holidays.
The Scientific Research and Experimental Development (SR&ED) tax credit program is the largest tax credit program in Canada. SRED a 3-billion-dollar program distributed to 20 000 companies annually. The SRED program rewards companies for conducting R&D work in Canada.
SRED Canada is one of the most lucrative R&D tax credit programs in the world. According to the OECD Canada has the 9th most generous R&D support program in the world and 1st among G7 countries.
SR&ED tax credits are awarded in arrears based on expenditures incurred while doing SR&ED qualifying work. CCPC’s can recover up to 70% of eligible salary expenditure and up to 40% of subcontractor and material costs. The percentages are somewhat smaller for large multinational corporations.
Many businesses fail to claim SRED credits due to the false assumption the SR&ED Canada program is restricted to “high tech” companies. Any company in any industry may have certain parts of their business that qualify them for SRED Canada credits at any given time. Contact the experts at G6 consulting for a free consultation. We don’t get paid until you get paid.
G6 Consulting can work with you to build your claim, co-ordinate with your accountant, submit your claim and get you your cheque. No cost until you get paid
Check our our SR&ED overview page to learn more about SR&ED and how to qualify
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