The SR&ED Tax Credit

The SR&ED tax credit is a program that promotes research and development for businesses in Canada. This is a tax credit program that attempts to enhance research and development efforts as well as reward companies for getting involved. Here are a few things to consider about the SR&ED tax credit that is issued in Canada.

How it Works

Any company that engages in research and development in Canada can potentially qualify for this credit. You do not have to be a particular type of business in order to access it. You could be a sole proprietorship, a partnership, or another type of business entity and still qualify.

With this program, you can get a tax credit on as much as 35% a qualified expenditures for research and development. This has a total dollar cap of $2 million. This means that if businesses in Canada are spending money on research and development, they can get more than a third of it back in the form of tax rebates.

Refundable Tax Credit

One of the best things about this particular program is that it provides you with a refundable tax credit. Even if the amount of the credit is more than what you owe in taxes for the year, they will give you back the difference in cash. With many other tax credits, they simply reduce your taxes to zero and you will pay nothing. With this program, you can actually make money from the government in certain cases.

Research and Development

The thought of research and development seems like an intimidating subject to many people. With this particular program, you do not necessarily have to have a lab or be involved in any detailed research and development activities to qualify. Many different activities that your business engages in could qualify as research and development. So as to avoid any confusion, you can access a list of activities that would qualify as research and development on their website. In addition to that, you can also access a list of activities that do not qualify for the credit. This takes all of the guesswork out of the process and makes it much simpler. 

Provincial Tax Credits

In addition to getting research and development tax credits from the federal government, you may also be able to qualify for provincial tax credits as well. Many of the provinces in Canada offer incentives for businesses to get involved with research and development. This will allow you to save money on your federal taxes and on your provincial taxes at the same time. When looking at these programs, you will find that some of them only apply to corporations unlike the SR&ED program which is available for any type of business.

Documentation

If you want to qualify for this tax credit, you will have to be able to document your research and development activities. You have to keep track of everything that you do in order to prove that you were actually engaged in thorough research and development activities.