SR&ED: Canada's Largest R&D Tax Incentive Program

Refundable means you get the credit as a cash payment even if you have no taxes owing. CCPCs with qualifying expenditures up to $3M get refundable ITCs. Larger corporations and non-CCPCs get non-refundable ITCs that only reduce taxes payable.

Yes — and this is one of SR&ED's greatest advantages. A CCPC that has invested in R&D but has no revenue can still receive a cash refund of 35% of qualifying expenditures.

The work must address a question that could not be resolved using standard practice or publicly available knowledge. The uncertainty must be genuine — you didn't know if the solution would work or how to achieve the desired outcome.

Yes, commonly. Software that solves a technical problem, develops new algorithms, or advances computing knowledge qualifies. However, routine software development using existing tools does not.

Not legally required, but strongly recommended. SR&ED language is technical and claims are complex. Professional SR&ED preparers typically charge 15–25% of the credit recovered. The net benefit is usually still significant.

Partially. You cannot claim a 35% SR&ED ITC on expenses that were already funded by a government grant (like IRAP). However, IRAP-funded wages may still generate some SR&ED credit on the unfunded portion.

You can file or amend SR&ED claims up to 18 months after the fiscal year end. You cannot go back and file SR&ED for years where the 18-month window has passed.

Project records showing the technical uncertainty, systematic investigation, and what was learned. This includes design documents, lab notebooks, test results, meeting notes, and time tracking records.

The traditional method claims actual overhead. The simplified proxy method (most common) uses a formula: 55% of direct SR&ED labour as a flat overhead amount, avoiding complex overhead allocation.

Yes — 80% of arm's-length contractor fees for eligible SR&ED work. Associated (related) contractors are treated differently — 100% but with restrictions.

Typically 60-120 days for desk reviews; complex claims with technical reviews can take 6-18 months. CRA has a target of 180 days for most claims.

Yes. Most provinces (Ontario, Quebec, BC, etc.) have their own R&D tax credits stacked on the federal claim. Ontario's OITC is 8% on wages; Quebec's R&D credit is among the most generous.

Experimental development (most common for businesses) involves using scientific knowledge to develop new or improved products/processes. Basic research advances knowledge without a specific commercial application — rarer in business contexts.

Yes — often overlooked by manufacturers. Process improvements, new materials testing, prototype development, and solving novel manufacturing challenges all commonly qualify.

Yes. Agricultural biotech, new crop varieties, pest management innovations, and precision agriculture technology qualify. Farm operations conducting genuine experimentation are eligible.