SR&ED is the CRA’s tax incentive program that provides credits and deductions for eligible research and development expenditures, one of the most generous R&D incentive programs available to Canadian businesses.
CCPCs can claim a refundable investment tax credit of up to 35 percent on the first $3 million of eligible SR&ED expenditures annually, meaning the CRA pays a portion of the credit even if the corporation has no tax payable. Larger corporations receive a non-refundable credit at 15 percent. Eligible expenditures include wages for employees engaged in qualifying work, materials consumed, and certain contractor costs.
The most common mistake is assuming SR&ED applies only to formal research labs or technology companies. Many businesses in manufacturing, construction, software, and professional services are conducting work that qualifies without realizing it. Claiming SR&ED requires a technical narrative that describes the scientific or technological uncertainty being addressed. The CRA reviews both the technical and financial components, and claims without rigorous documentation are often disallowed.
See also: Canadian-Controlled Private Corporation (CCPC) · Active Business Income · T2 Corporate Tax ReturnIf your business is solving technical problems others have not solved, SR&ED may apply, and the credit can be substantial. See how Wefinx approaches tax planning.