The Government of Canada provides tax incentives to encourage Canadian companies of all sizes and in all industry sectors to conduct Scientific Research and Experimental Development (SR&ED). These tax incentives come in three forms: an income tax deduction, an investment tax credit (ITC), and, more commonly, a refund.
The SR&ED Program provides more than $3 billion in tax incentives to over 20,000 claimants annually, making it the single largest federal program that supports business R&D in Canada, in addition to further provincial incentives. The program is administered by the Canada Revenue Agency (CRA).
Most claims made by small businesses are for Experimental Development. Experimental Development is work undertaken to create or incrementally improve products, processes, materials and devices.
Projects are evaluated in terms of the program’s three criteria: evidence of a systematic investigation within the context of the business, technological uncertainty, and technological advancement.