Canada is responsible for just over 2% of the world’s pharmaceutical sales, and its pharma industry employs more than 35,000 people, according to the statisticians at Made in Ca. Canada’s aging population is increasing demand for novel drugs and formulations, and this is fostered by the government’s SR&ED tax credit scheme, a program of tax incentives designed to promote R&D. In 2025/26, 14.2% of the investment tax credits (ITCs) allowed by the Canadian SR&ED program went to companies in the medical sciences field.
The SR&ED program reduces a pharma company’s tax liability in one of two ways. Either the company can deduct qualifying SR&ED expenditure for tax purposes. Or the company can receive an ITC to set against their tax bill.
As SR&ED advisers, we are ideally placed to help pharma companies make the right decision to minimize their tax burden. Get in touch to find out how we can help.
How do pharma companies in Canada make a claim from SR&ED?
Pharma companies and contract research organizations (CROs) apply to SR&ED with form T661, which is submitted alongside the corporate tax return. Any research work that aims to resolve a scientific or medical uncertainty, results in an advancement and involves systematic investigation is eligible.
Find out how much you could potentially claim with SR&ED.
Most pharma companies have workflows that are well set up for their SR&ED application. Having said that, our clients in the pharma sector would tell you that the expertise of a tax credit consultant can make the process more efficient. We can also advise on claims involving costs for contractors, and help with overhead calculations.
Research projects that are eligible for the Canadian SR&ED tax credit
All these activities carried out by pharma companies and CROs may qualify where they involve scientific or tecnological uncertainty and systemic investigation for the SR&ED program:
- developing new or improved products or manufacturing processes
- developing or improving diagnostic procedures/devices
- Phase I – Human Safety
- Phase II – Early Efficacy
- Phase III – Expanded Therapeutic
- Phase IV – Post Approval Trials
- multinational clinical trials
- epidemiological studies
Use our tool to check your eligibility for the SR&ED program.
Here are a couple of examples of research activity that could be eligible for the SR&ED tax credit.
Controlled release drug delivery
A pharmaceutical company is developing a tablet that has precise release kinetics. The work aims to resolve an uncertainty about achieving consistent release profiles across patient conditions. Researchers carry out polymer selection, release modelling and in vitro testing of the delivery system.
At the end of the project, they have achieved an advancement because they’ve improved the delivery mechanism beyond that offered by existing products.
Scaling up the manufacturing process for an allergy med
Having developed a med for allergy sufferers, a pharmaceutical company wants to move from lab-scale production to commercial manufacturing.
The company needs to resolve some uncertainties first. They want to know how a particular reaction in the production process will behave in large volumes. They carry out pilot plant trials and process modelling to resolve this uncertainty. The results show that the proposed production process cannot be scaled, so the company will need to try another method. Although the research did not give the result the company hoped for, it advanced knowledge and so the company can make an SR&ED claim for the costs.
Discover more about how healthcare and medtech companies take advantage of SR&ED.
Get help from a human SR&ED consultant
Although the Canadian Revenue Agency (CRA) offers a self-service SR&ED review process, we know that sometimes you just want to speak with a real person about your application. Our consultants can check whether your SR&ED claim for pharmaceutical R&D is complete, saving you time and ensuring that you optimize this valuable benefit. Contact us to make an appointment.
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