How Does the SR&ED Program in Canada Work?

SR&ED stands for Scientific Research and Experimental Development so you can probably figure out that the SR&ED program focuses on research and development. The SR&ED Program in Canada focuses on encouraging companies to do research and development that will benefit the country and the world in return for tax incentives.

The Federal SR&ED Program in Canada offers tax incentives to both small and large companies if they are willing to do research and development work to improve upon or create new ideas, products and processes, and advance technology in the country. Qualified companies can get tax incentives from the SR&ED Program based on their spending on:

* R&D materials
* R&D overhead costs
* R&D payroll expenses
* SR&ED contracts

What Sort of Projects Qualify?
Only some of the projects done by Canadian companies are going to qualify for the tax credits. The
following are the three things a company’s project must do if it is going to qualify for a SR&ED tax
credit:

1. The project must increase understanding with regard to one aspect of scientific technology.

2. The project must explain a vague scientific or technological issue.

3. The project must use scientific methodology and investigation methods done by qualified individuals.

Not all kinds of work projects will meet the requirements for the SR&ED Program tax credits. The majority of the work that does qualify for the SR&ED Program is focused on areas such as experimental development, applied and basic research, and support work. The only way any of the areas qualifies, though, is if it meets the criteria above.

A lot of the companies that complete applications to join the SR&ED Program are not eligible due to  not meeting the criteria. Activities including research in social science, improving upon an existing commercial product, market research, promoting products, testing the quality of products, collecting data for business, and prospecting for gas and other resources are not going to be eligible for the SR&ED Program tax credits.

Making Canada and the World Better

The Canadian SR&ED Program is the largest federal program in the country supporting research and development. The program distributes several billion dollars a year to more than 18,000 companies. Close to 74% of the companies that get these tax credits are small business and start-ups. The SR&ED Program helps Canadian companies grow and improves the standing of Canada with regard to innovation and technology around the world.

For more information on the SRED program, visit http://www.evamax.com/