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RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
RDP Associates Ltd - SRED Tax Credits (2011)
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RDP Associates Ltd - SRED Tax Credits (2011)

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RDP Associates is devoted to providing your company with value-driven consultative services. In fulfilling this mission, we help you maximize your R&D tax credit or refund. Our dedication to this …

RDP Associates is devoted to providing your company with value-driven consultative services. In fulfilling this mission, we help you maximize your R&D tax credit or refund. Our dedication to this mission is best demonstrated by our personal commitment to quality service. The depth of that service is best expressed by those many clients and people we serve. RDP guarantees that there will be no charges to you for time or expense incurred if R&D refunds or credits are not recovered.

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  • 1. Canada’s SR & ED Program (Scientific Research & Experimental Development) <ul><li>Prepared By </li></ul><ul><li>RDP Associates Inc. </li></ul><ul><li>Christopher Bodnar </li></ul><ul><li>[email_address] </li></ul>
  • 2. Background <ul><li>Largest tax incentive program in Canada </li></ul><ul><li>Each year, the SR & ED program provides over $4 billion to more than 18,000 claimants </li></ul><ul><li>50% of SR & ED eligible companies in Canada are not claiming </li></ul><ul><li>The average claim is typically around $150,000.00 </li></ul><ul><li>Cash or tax credit for money spent on SR & ED (filed with Federal corporate tax returns) </li></ul><ul><li>Depending on company structure , credit may be 41.5% to 68.5% on money spent / expenditures incurred </li></ul>
  • 3. How the program is used <ul><li>Spending money on eligible R & D (Research and Development) </li></ul><ul><li>Claims are filed each year end preferably with financial statements and tax returns </li></ul><ul><li>Claims are processed through the CRA </li></ul><ul><li>Refunds are based on eligible expenditures incurred by the company </li></ul><ul><li>Claims must be filed within 18 month’s of your fiscal year end </li></ul><ul><li>Returns are received within 120 days of filing for CCPC’s and 240 days for larger corporations </li></ul>
  • 4. Industry Eligible's <ul><li>Software/IT </li></ul><ul><li>Automotive </li></ul><ul><li>Environmental </li></ul><ul><li>Food Sciences </li></ul><ul><li>Pharmaceutical </li></ul><ul><li>Dental </li></ul><ul><li>Chemical Transportation </li></ul><ul><li>Electronics & Optics </li></ul><ul><li>Telecommunications </li></ul><ul><li>Breweries </li></ul><ul><li>Forestry, Mining & Agriculture </li></ul><ul><li>Manufacturing </li></ul><ul><li>Plastics </li></ul><ul><li>Textiles </li></ul><ul><li>Farming </li></ul><ul><li>Automotive </li></ul><ul><li>Environmental </li></ul><ul><li>Food Sciences </li></ul><ul><li>Material Development </li></ul><ul><li>Machinery & Equipment </li></ul><ul><li>Tool & Die </li></ul><ul><li>Construction </li></ul>
  • 5. CRA Program Objectives <ul><li>Encourage R & D in the private sector </li></ul><ul><li>Increase Canada’s competitiveness in the global markets through innovation </li></ul><ul><li>Retain skilled labor within Canada </li></ul><ul><li>Influence and create Canadian employment opportunities for new graduates </li></ul><ul><li>Support Canada’s goal to faster, greater productivity </li></ul>
  • 6. Qualified SR & ED Expenditures <ul><li>Salary and wages </li></ul><ul><li>Overhead </li></ul><ul><li>Materials </li></ul><ul><li>Capital Expenditures </li></ul><ul><li>Consulting Costs </li></ul>
  • 7. <ul><li>New or improved products </li></ul><ul><li>Design improvement </li></ul><ul><li>Field specific applications </li></ul><ul><li>R&D performed in house or contracted outside </li></ul><ul><li>Existing process modification </li></ul><ul><li>New process development </li></ul>What Qualifies SR & ED <ul><li>Prototype development </li></ul><ul><li>Development or creation of new algorithms </li></ul><ul><li>Functionality issues in new code architecture </li></ul><ul><li>Field specific applications </li></ul><ul><li>Integration into legacy hardware or into legacy software </li></ul>
  • 8. Who can claim? <ul><li>Established entities in Canada including : </li></ul><ul><li>Qualified Canadian Controlled Private Corporations (CCPC’s) – Refundable </li></ul><ul><li>Private, Public and Foreign Owned Corporations – Non-Refundable </li></ul>
  • 9. Three SR & ED Criteria <ul><li>Technological Advancement: </li></ul><ul><li>Is the discovery of knowledge that advances the understanding of scientific relations or technologies through experimental development. </li></ul><ul><li>Technological Uncertainty: </li></ul><ul><li>Exists if a scientific or technological objective cannot be achieved, or it is not known how to achieve , based on what is generally available. </li></ul><ul><li>Systematic Investigation: </li></ul><ul><li>Is the documented work evident of investigation, experimentation, and/or analysis by industry qualified personnel . </li></ul>
  • 10. <ul><li>Form T661 (claim for SR&ED) </li></ul><ul><li>Form T2 SCH 31, ITC for Corporations </li></ul><ul><li>Technical study </li></ul>Documents required to file for SR & ED
  • 11. Benefit of Using an SR & ED Tax Professional <ul><li>Proven developed and implemented systems to capture and report on both technical and financial aspects of the SR & ED claim. </li></ul><ul><li>Assist with the preparation of the technical report describing the eligible projects to accompany your financial information to the CRA. </li></ul><ul><li>Assist with the science and financial audits by the CRA. </li></ul><ul><li>Maximize your claim while minimizing the time required by your in house professionals, allowing you to focus time and money on your core business. </li></ul><ul><li>Less likely to have your claim challenged or reviewed. </li></ul><ul><li>Industry wide knowledge giving you the competitive edge. </li></ul>
  • 12. SR & ED Tax Credits <ul><li>Phase out of 35% rate for CCPC’s applies for: </li></ul><ul><li>Taxable income in excess of $500,000 </li></ul><ul><li>Taxable capital in excess of $10,000,000 </li></ul>ITC rate on total expenditures up to expenditure limit 35% 35% 20% 20% Refund Rate 100% 40% ---- 40% Type of Entity CCPC’s Other corporations Individuals and unincorporated businesses ITC rate on total expenditures in excess of expenditure limit 20% 20% 20% 20% Nature of expenditure Current Capital Current and Capital Current and Capital
  • 13. Recent Legislative Changes <ul><li>SR & ED carried on outside of Canada: </li></ul><ul><li>“ Foreign” wages limited to 10% of total wages </li></ul><ul><li>Ontario taxable income must equal federal taxable income </li></ul>
  • 14. Common Ineligible Activities <ul><li>Market research and sales promotion </li></ul><ul><li>Quality control and routine testing </li></ul><ul><li>Human or Social Sciences </li></ul><ul><li>Prospecting, exploring or drilling for minerals, petroleum or natural gas </li></ul><ul><li>aesthetic style changes </li></ul><ul><li>Routine data collection </li></ul>
  • 15. <ul><li>Basic Research : </li></ul><ul><li>An advancement of scientific knowledge without a specific practical application </li></ul><ul><li>Applied Research : </li></ul><ul><li>An advancement of scientific knowledge with a specific practical application </li></ul><ul><li>Experimental Development : </li></ul><ul><li>A technological advancement for the purpose of creating a new or improved product or process(es) </li></ul>SR & ED
  • 16. Identifying Eligible SR & ED Activities <ul><li>Were industry professionals i.e. Engineers involved in the project? </li></ul><ul><li>Were applications created for patents? </li></ul><ul><li>What is the industry? </li></ul><ul><li>Does the product or process have to meet new changes to industry standards? </li></ul><ul><li>Did the company retain intellectual property rights to any subcontracted work? </li></ul><ul><li>Is the company trying to develop a new process or product with no novel benchmark? </li></ul><ul><li>Is this a improvement that requires new technologies to succeed? </li></ul><ul><li>Did the company endure any failures along the way? </li></ul>
  • 17. Identifying Allowable Expenditures <ul><li>Traditional: </li></ul><ul><li>Attributed overhead expenditures are allowed (Rent, taxes, utilities, etc.) </li></ul><ul><li>Proxy: </li></ul><ul><li>Rather than calculating attributable overhead expenditures, 65% of labor is added to eligible expenditures. </li></ul>
  • 18. Proxy Method <ul><li>A predetermined amount (65%) is calculated, based on SR & ED salaries and wages for T4 employees </li></ul><ul><li>The proxy amount represents SR & ED eligible overhead expenditures </li></ul><ul><li>Overhead expenditures are not to be included in the SR & ED claim </li></ul><ul><li>Selection of proxy method within the year is irrevocable for that year </li></ul>
  • 19. Proxy Reflects Following Expenditures <ul><li>Office supplies </li></ul><ul><li>General purpose office equipment </li></ul><ul><li>Utilities </li></ul><ul><li>Support staff salaries or wages </li></ul><ul><li>Travel and training directly engaged in SR & ED </li></ul><ul><li>Property taxes </li></ul><ul><li>Maintenance/ upkeep of SR & ED premises, facilities or equipment </li></ul><ul><li>Any other exp. directly related to the prosecution of SR & ED that you would not have incurred if the SR & ED had not occurred </li></ul>
  • 20. Salaries & Wages <ul><li>Experimental work and analysis </li></ul><ul><li>Chart, graph preparations, calculations and recording measurements </li></ul><ul><li>Eligible work performed in respect to engineering or design, operations research, mathematical analysis, computer programming, data collection, testing and psychological research that falls within the parameters and is directly in support of eligible SR & ED work </li></ul>
  • 21. Materials Consumed <ul><li>Materials rendered virtually useless as a result of the SR & ED (e.g. Prototype) </li></ul><ul><li>Materials not kept in inventory for future use, custom product or commercial asset </li></ul><ul><li>Material was used in experimental production, from which no units were sold </li></ul>
  • 22. “ Prescribed Expenditures” Do NOT Qualify For ITC <ul><li>Administration salaries not directly associated with SR&ED projects </li></ul><ul><li>Fees including annual, legal or accounting </li></ul><ul><li>Interest and other related fees </li></ul><ul><li>Entertainment </li></ul><ul><li>Advertising or marketing costs </li></ul><ul><li>Membership fees </li></ul>
  • 23. Documentation <ul><li>CRA insists on seeing documentation that demonstrates a logged sequence of events of the work being carried out for the purpose of SR&ED </li></ul><ul><li>Potential sources of evidence of technological advancement, uncertainty or content </li></ul><ul><li>Feasibility studies, reviews of existing technology, beta products </li></ul><ul><li>Internet searches </li></ul><ul><li>Search for generally available info </li></ul><ul><li>Project plan – objectives, hypothesis, plan, budget, staffing, deadlines </li></ul><ul><li>Notebooks and logs </li></ul><ul><li>Defect logs </li></ul><ul><li>Minutes of meetings </li></ul><ul><li>Open issue logs </li></ul>
  • 24. Documentation <ul><li>Design, plan sketches, charts </li></ul><ul><li>Photographs, videos </li></ul><ul><li>Digital voice recordings </li></ul><ul><li>Prototypes and sample parts </li></ul><ul><li>Internal correspondence (emails, memos) </li></ul><ul><li>Personnel qualifications </li></ul><ul><li>Corrective action reports </li></ul><ul><li>Continuous improvement reports </li></ul><ul><li>Test reports </li></ul><ul><li>Tryout reports </li></ul>
  • 25. Contact a Research & Development Professional <ul><li>Head Office (Toronto) </li></ul><ul><li>200 University Ave. 14 th Floor </li></ul><ul><li>Toronto, ON M5H 3C6 </li></ul><ul><li>1-416-368-9341 </li></ul><ul><li>Assisting Canadian businesses connect their innovation to their bottom line for over 20 years! </li></ul>

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