The Canadian government encourages & recognizes innovation as means for companies to stay competitive. If your organization carried out a systematic investigation in a field of science or technology through experiment or analysis, you might be eligible for the SR&ED Tax credit.
Scientific Research & Experimental Development Program (SR&ED) is a program designed by the CRA that provides refundable tax credits to businesses performing R&D work in Canada. The program allows a company in any industry to apply for SR&ED if their R&D projects have encountered scientific or technological challenges that routine solutions could not solve. The business can use their cash refund to hire additional staff, create new products or improve existing products, materials, devices or fund research and development projects.
Any start-up or existing business can apply for SR&ED as long as it is registered as a Canadian corporation, sole proprietorship, partnership, or trusts.
Canadian Controlled Private Corporations that meet the SR&ED eligibility criteria can receive a cash refund from the program that allows up to 64% of eligible R&D expenses, which includes employee salaries. For example, if your business conducted an R&D project with three employees with a combined $150,000 in salary, an approved SR&ED claim at 64% of their salaries would entitle you to a $96,000 cash refund. Under the SR&ED program, companies can also claim for sub-contractors and materials.