Canadian businesses that spend money on scientific research and experimental development can claim SR & ED tax credits. It is the single largest source of federal incentives for supporting and promoting R&D activities by the private industry in Canada. The incentives in the form of tax credits and/or cash refunds are available for qualified work done by a business of any size in any and all sectors.
The agency in charge of administering the investment tax credit (ITC) is the CRA or Canada Revenue Agency. ITCs may vary depending on the applicant's business structure. CCPCs (Canadian-controlled private corporations) get a 35% ITC for the first CAD $3 million R&D spending. Anything in excess of this will earn a 20% ITC.
Other types of businesses, such as a corporation, partnership or proprietorship get a uniform 20 percent ITC all the way. A proprietorship and some trusts are allowed to claim refunds if there is an ITC amount leftover after taxes have been paid. Corporations may not apply for ITC refunds.
The government's definition for a qualified project includes tech advancement related experimental development. Applied research for developing specific applications and basic research done where no application is to be developed are both valid projects. Support work done for any of these qualified projects can be included.
The incentive can be applied for expenditures on these projects such as machinery, equipment and material purchase. Spending on wages and some overheads can be included too. The ITC cannot be applied for market research or commercial production and implementation of a new process, material or product.
Form T661 has to be included with the returns for the sr & ed tax credits to be granted. A corporation has to additionally include form T2 SCH 31 along with T661, while an individual will have to provide the form T2038. This has to be done within 18 months of the tax year during which the spending occurred.
The agency in charge of administering the investment tax credit (ITC) is the CRA or Canada Revenue Agency. ITCs may vary depending on the applicant's business structure. CCPCs (Canadian-controlled private corporations) get a 35% ITC for the first CAD $3 million R&D spending. Anything in excess of this will earn a 20% ITC.
Other types of businesses, such as a corporation, partnership or proprietorship get a uniform 20 percent ITC all the way. A proprietorship and some trusts are allowed to claim refunds if there is an ITC amount leftover after taxes have been paid. Corporations may not apply for ITC refunds.
The government's definition for a qualified project includes tech advancement related experimental development. Applied research for developing specific applications and basic research done where no application is to be developed are both valid projects. Support work done for any of these qualified projects can be included.
The incentive can be applied for expenditures on these projects such as machinery, equipment and material purchase. Spending on wages and some overheads can be included too. The ITC cannot be applied for market research or commercial production and implementation of a new process, material or product.
Form T661 has to be included with the returns for the sr & ed tax credits to be granted. A corporation has to additionally include form T2 SCH 31 along with T661, while an individual will have to provide the form T2038. This has to be done within 18 months of the tax year during which the spending occurred.
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