Nature of projects admissible to the SR&ED Tax Credits By Michel Virard, P.Eng. Valmic Conseil inc. 514 343 4571 [email_address]

The SR&ED Tax Credit Program SR= Scientific Research ED= Experimental Development (Formerly TD=Technological Development) Is administered through the CRA (Canada Revenue Agency) Potentially concerns any Canadian enterprise that innovates in its products, services or processes

SR= Scientific Research

ED= Experimental Development

(Formerly TD=Technological Development)

Is administered through the CRA (Canada Revenue Agency)

Potentially concerns any Canadian enterprise that innovates in its products, services or processes

Conditions for admissibility Company property structure Project nature Allowable expenditure types Fiscal year limits for the claim

Company property structure

Project nature

Allowable expenditure types

Fiscal year limits for the claim

Project Nature Admissible: Technological nature Must include uncertain elements from the start Must include some form of experimental work Must lead the company toward the acquisition of knowledge not readily available on the knowledge market The net result of that research must be a technological knowledge gain for the company. (Technological Advance)

Admissible:

Technological nature

Must include uncertain elements from the start

Must include some form of experimental work

Must lead the company toward the acquisition of knowledge not readily available on the knowledge market

The net result of that research must be a technological knowledge gain for the company. (Technological Advance)

Project Nature Not admissible: Market surveys Psychological, sociological, economic demographic studies, etc. Tiny variations of existing products (if no uncertainty) Projects where requisite knowledge is already freely available (textbooks, Internet) Projects where there is little or no experimental work

Not admissible:

Market surveys

Psychological, sociological, economic demographic studies, etc.

Tiny variations of existing products (if no uncertainty)

Projects where requisite knowledge is already freely available (textbooks, Internet)

Projects where there is little or no experimental work

Nature of allowable expenditures Salaries and wages of employees doing the research ($$$) Cost of material consumed during the experiments ($$) Cost of contracts required for building prototypes and test benches or for contractor employees time during the experiments ($)

Salaries and wages of employees doing the research ($$$)

Cost of material consumed during the experiments ($$)

Cost of contracts required for building prototypes and test benches or for contractor employees time during the experiments ($)

Period covered by a claim A company has 18 months after its fiscal year end to produce an SR&ED claim for that fiscal year

A company has 18 months after its fiscal year end to produce an SR&ED claim for that fiscal year

Technical details Prepared by your consultant: Scientific report for each project Allowable expenditure calculations Claim forms (fed.+prov.) Integration of both claims into their respective tax returns

Prepared by your consultant:

Scientific report for each project

Allowable expenditure calculations

Claim forms (fed.+prov.)

Integration of both claims into their respective tax returns

The Scientific Report Must include: Research context Technical objectives of the project Technological uncertainties Technological advance (actual or aimed at) Allowable works (experiments) Available evidences that the research was actually carried out Technical personal assigned to the project

Must include:

Research context

Technical objectives of the project

Technological uncertainties

Technological advance (actual or aimed at)

Allowable works (experiments)

Available evidences that the research was actually carried out

Technical personal assigned to the project

Preliminary interviews During the preliminary interview, your consultant will attempt to identify SR&ED projects from your activities in a given fiscal year Usually those R&D projects do not match exactly with the internal projects but rather with technological development « axes »

During the preliminary interview, your consultant will attempt to identify SR&ED projects from your activities in a given fiscal year

Usually those R&D projects do not match exactly with the internal projects but rather with technological development « axes »

Detail interviews Later, a series of detailed interviews will dig deeper into every identified project Keep in mind that our scientific reports are rarely truly « scientific » since what we want to do is to produce a structured description precisely meeting the bureaucratic requirements of CRA

Later, a series of detailed interviews will dig deeper into every identified project

Keep in mind that our scientific reports are rarely truly « scientific » since what we want to do is to produce a structured description precisely meeting the bureaucratic requirements of CRA

Confidentiality The Canada Revenue Agency will protect your scientific reports with the same level of confidentiality used for the other private fiscal documents they handle Your consultants, engineers or accountant, are required by their respective Professional Order to provide a vigilance of every moment while dealing with their clients’ folders

The Canada Revenue Agency will protect your scientific reports with the same level of confidentiality used for the other private fiscal documents they handle

Your consultants, engineers or accountant, are required by their respective Professional Order to provide a vigilance of every moment while dealing with their clients’ folders