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Nature Of Canada Sr&Ed Projects

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SR&ED claims in Canada

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Nature Of Canada Sr&Ed Projects

  1. 1. Nature of projects admissible to the SR&ED Tax Credits By Michel Virard, P.Eng. Valmic Conseil inc. 514 343 4571 [email_address]
  2. 2. The SR&ED Tax Credit Program <ul><li>SR= Scientific Research </li></ul><ul><li>ED= Experimental Development </li></ul><ul><li>(Formerly TD=Technological Development) </li></ul><ul><li>Is administered through the CRA (Canada Revenue Agency) </li></ul><ul><li>Potentially concerns any Canadian enterprise that innovates in its products, services or processes </li></ul>
  3. 3. Conditions for admissibility <ul><li>Company property structure </li></ul><ul><li>Project nature </li></ul><ul><li>Allowable expenditure types </li></ul><ul><li>Fiscal year limits for the claim </li></ul>
  4. 4. Project Nature <ul><li>Admissible: </li></ul><ul><ul><li>Technological nature </li></ul></ul><ul><ul><li>Must include uncertain elements from the start </li></ul></ul><ul><ul><li>Must include some form of experimental work </li></ul></ul><ul><ul><li>Must lead the company toward the acquisition of knowledge not readily available on the knowledge market </li></ul></ul><ul><ul><li>The net result of that research must be a technological knowledge gain for the company. (Technological Advance) </li></ul></ul>
  5. 5. Project Nature <ul><li>Not admissible: </li></ul><ul><ul><li>Market surveys </li></ul></ul><ul><ul><li>Psychological, sociological, economic demographic studies, etc. </li></ul></ul><ul><ul><li>Tiny variations of existing products (if no uncertainty) </li></ul></ul><ul><ul><li>Projects where requisite knowledge is already freely available (textbooks, Internet) </li></ul></ul><ul><ul><li>Projects where there is little or no experimental work </li></ul></ul>
  6. 6. Nature of allowable expenditures <ul><li>Salaries and wages of employees doing the research ($$$) </li></ul><ul><li>Cost of material consumed during the experiments ($$) </li></ul><ul><li>Cost of contracts required for building prototypes and test benches or for contractor employees time during the experiments ($) </li></ul>
  7. 7. Period covered by a claim <ul><li>A company has 18 months after its fiscal year end to produce an SR&ED claim for that fiscal year </li></ul>
  8. 8. Technical details <ul><li>Prepared by your consultant: </li></ul><ul><li>Scientific report for each project </li></ul><ul><li>Allowable expenditure calculations </li></ul><ul><li>Claim forms (fed.+prov.) </li></ul><ul><li>Integration of both claims into their respective tax returns </li></ul>
  9. 9. The Scientific Report <ul><li>Must include: </li></ul><ul><li>Research context </li></ul><ul><li>Technical objectives of the project </li></ul><ul><li>Technological uncertainties </li></ul><ul><li>Technological advance (actual or aimed at) </li></ul><ul><li>Allowable works (experiments) </li></ul><ul><li>Available evidences that the research was actually carried out </li></ul><ul><li>Technical personal assigned to the project </li></ul>
  10. 10. Preliminary interviews <ul><li>During the preliminary interview, your consultant will attempt to identify SR&ED projects from your activities in a given fiscal year </li></ul><ul><li>Usually those R&D projects do not match exactly with the internal projects but rather with technological development « axes » </li></ul>
  11. 11. Detail interviews <ul><li>Later, a series of detailed interviews will dig deeper into every identified project </li></ul><ul><li>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 </li></ul>
  12. 12. Confidentiality <ul><li>The Canada Revenue Agency will protect your scientific reports with the same level of confidentiality used for the other private fiscal documents they handle </li></ul><ul><li>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 </li></ul>

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