In Canada, businesses whose work involves scientific and technological innovation can benefit from tax incentives through a program known as SR&ED (scientific research and experimental development).
This program accepted claims worth $4.5billion from Canadian companies carrying out scientific or technological R&D in the period April 2024 to March 2025. Canadian SR&ED is one of the world’s most generous government schemes to incentivize innovation.
But why does the Canadian Government incentivize innovation to this degree? Read on to discover how innovation benefits all Canadians.
What is innovation and how does it drive economic growth?
Innovation is the creation of a new or improved product or process. It increases productivity, which creates jobs, raises wages and improves living standards while stimulating economic growth.
Powering innovation to drive the Canadian economy
By promoting innovation, the Canadian Government can improve its economy and improve the day-to-day lives of Canadians. The SR&ED program, which is administered by the Canadian Revenue Agency (CRA), is one of the incentives the government uses to create an economy that is conducive to innovation.
Another program is IRAP (Industrial Research Assistance Program), which is financial support from the National Research Council of Canada (NRC).
Innovation programs can be costly, and it may be some years before a business can profit from their work. So incentives like these help organizations manage the risks associated with research and development.
What is the SR&ED program?
SR&ED is a suite of tax incentives that make it easier for businesses to carry out research and development.
The program allows businesses to either claim a deduction against income; or claim an investment tax credit (ITC).
Is my R&D program eligible for SR&ED?
The CRA has some eligibility criteria for its SR&ED program. These are:
“The work must be conducted for the advancement of scientific knowledge or for the purpose of achieving a technological advancement.”
AND
“The work must be a systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis.”
Also, the research and dev work must be conducted in Canada.
How do I take advantage of the Canadian SR&ED program?
The CRA recommends that you submit your SR&ED claim along with your company’s tax return. There is a strict deadline for SR&ED claims, which is linked to your company’s tax filing date.
The claim includes a description of the work you are claiming for, and a list of expenditures. It’s important that your claim is complete, accurate and supported by evidence.
The CRA will then check your claim, and either accept it, or if it doesn’t meet the criteria, it will reject your claim.
Help with preparing an SR&ED claim
The CRA has some resources to help you file your SR&ED claim, including:
- webinars
- a pre-claim consultation (limited to ten projects a year)
- a self-assessment learning tool
You can also appoint an accountant specializing in SR&ED claims, like Canadian SR&ED. Our experts provide tailored solutions that will help you to maximize the refund you’ll receive from the CRA.
Supporting business that contribute to the world through R&D