SR&ED Eligibility Criteria
To qualify for SR&ED tax incentive programs, a business activity must:
- Advance the understanding of scientific relations or technologies;
- Address scientific or technological uncertainty;
- Incorporate a systematic investigation based on experiments or analyses by qualified personnel.
If you are not sure for SR&ED eligibility, check out our Fund Assessment Look Up.
Allowable expenditures
Businesses that are engaged in scientific research and experimental development may be able to obtain a tax credit for certain potentially allowable expenditures such as:
- Salary or wages;
- Materials consumed and transformed;
- Contract costs;
- Lease costs of SRED equipment (Will be disallowed from Jan of 2014);
- Purchase costs of SRED equipment (Will be disallowed from Jan of 2014).
The SR&ED ITCs on salary or wages may include those incurred in respect of SR&ED carried on outside Canada that is related to the taxpayer’s business. The salary or wages incurred outside Canada is limited to 10% of the total salary and wages directly attributable to SR&ED carried on in Canada. To calculate your SR&ED claim check our SR&ED Fund Calculator
Comparison of SR&ED Tax Credit Changes
Example for SR&ED Expenditures |
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| Calculation of Qualified SRED Expenditures | 2012 | 2013 | 2014 |
| Labour/Wages (T4) | $500,000 | $500,000 | $500,000 |
| Overhead (via Proxy: 65%/60%/55% of T4 Labour) | $325,000 | $300,000 | $275,000 |
| Materials Destroyed + Transformed | $100,000 | $100,000 | $100,000 |
| Arms-length Subcontracts | $150,000 | $120,000 | $120,000 |
| R&D Capital/Equipment | allowed | allowed | not allowed |
| Total Qualified Expenditures | $1,075,000 | $1,020,000 | $995,000 |
Example for Calculating Tax Credit (CCPC)* |
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| 2012 | 2013 | 2014 | |
| SRED Expenditures | $1,075,000 | $1,020,000 | $995,000 |
| Ontario – ORDTC (4.5%) | $48,375 | $45,900 | $44,775 |
| Ontario – OITC (10%) | $102,663 | $97,410 | $95,023 |
| Federal – ITC (35%) | $323,386.88 | $306,841.50 | $299,320.88 |
| Total SR&ED Benefit For You (44.1%) | $474,424 | $450,152 | $439,118 |
| * CCPC – Canadian Controlled Private Corporation | |||
Example for Calculating Tax Credit (non-CCPC) |
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| 2012 | 2013 | 2014 | |
| SRED Expenditures | $1,075,000 | $1,020,000 | $995,000 |
| Ontario – ORDTC (4.5%) | $48,375 | $45,900 | $44,775 |
| Federal – ITC (20/15%) | $205,325 | $146,115 | $142,534 |
| Total SR&ED Benefit For You (23.6%/18.8%) | $253,700 | $192,015 | $187,309 |
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