Capital Connections Showcase - CRA

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Capital Connections Showcase - CRA

  1. 1. SR&ED tax credits and stacking of R&D government assistance: are you maximizing your project funding? Dr. David Arsenault Research and Technology Manager SR&ED- Atlantic Region
  2. 2. Stacking <ul><li>Refers to the total financial assistance that can be received from different governmental sources by a given recipient </li></ul>
  3. 3. Total Government Assistance (TGA) <ul><li>Upper limit of TGA set by Transfer Payment Policy of the Treasury Board of Canada </li></ul>Activity Stacking limit Social program ( e.g. , core funding) 100% Social program ( e.g. , training) 90% Economic program ( e.g. , R&D) 75%
  4. 4. Stacking calculations <ul><li>The Treasury Board of Canada requires that the terms and conditions in government assistance agreements demonstrate that due consideration has been given to stacking. </li></ul><ul><li>Managers of the various assistance programs should expect that other government entities may be interested in participating in the funding of a particular project. </li></ul>
  5. 5. <ul><li>Other federal government departments </li></ul><ul><li>Other government sources (provincial and municipal) </li></ul><ul><li>The recipient itself is contributing to the project </li></ul>Stacking calculations The percentage of total government assistance (TGA) must be stated explicitly in the terms and conditions of assistance agreements:
  6. 6. SR&ED vs. R&D Concept Product / process 1. In house knowledge/technology base 2. Public domain information/outside expertise 3. Experimentation/analysis to overcome identified scientific/technological uncertainty SR&ED
  7. 7. Complicating factors <ul><li>The majority of governmental R&D funding programs involve applying for the funding before the work is carried out. </li></ul><ul><li>SR&ED tax incentives from the CRA are obtained after the work was carried out (and expenditures have been incurred) through the filing of the tax return. </li></ul>
  8. 8. Uncertainty in calculating stacking ACOA NSERC IRAP SR&ED? 75 %
  9. 9. Unrealized project funding ACOA NSERC IRAP SR&ED 75 % Expected ACOA NSERC IRAP SR&ED After CRA claim review Funding gap
  10. 10. SR&ED legislation <ul><li>Eligibility of project work: Ss. 248(1) of the ITA </li></ul><ul><li>Eligibility of expenditures: Ss. 37 and Ss. 127 </li></ul><ul><li>CRA-SR&ED staff are specialists the administration of the Income Tax Act </li></ul>
  11. 11. Pre-Claim Project Review (PCPR) <ul><li>Free advisory service </li></ul><ul><li>Preliminary opinion of eligibility of project work and expenditures </li></ul><ul><li>Recommend that consent forms be drafted </li></ul>
  12. 12. Exceeding the stacking limit ACOA NSERC IRAP SR&ED 75 % Expected ACOA NSERC IRAP After CRA claim review Funding excess SR&ED
  13. 13. <ul><li>The CRA is ultimately not responsible of ensuring that stacking limitations of the Treasury Board of Canada are met. </li></ul><ul><li>Given that the SR&ED Program is an entitlement program, any work and related expenditures incurred that meet the requirements of the Income Tax Act will result in tax credits being allowed to taxpayers, regardless of stacking </li></ul>Exceeding the stacking limit
  14. 14. Questions? Contact information: Dr. David Arsenault Research and Technology Manager SR&ED Program – Atlantic Region Tel: 506-851-3358 E-mail: DavidJ.Arsenault@cra-arc.gc.ca

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