How Small Businesses Can Utilize R&D Tax Credits in Vancouver

What are research and development tax credits, and does your business qualify for these tax credits? The scientific and experimental development tax credit, otherwise known as SR&ED tax credit, is a helpful program that will reward qualifying businesses who conduct research and development by September 1st, 2017.

Will This SR&ED Tax Credit Really Make A Difference?

How substantial is this tax credit for your company? The benefits are vast with the SR&ED program. Businesses that qualify and that are completely Canadian controlled (otherwise known as CCPCs) can claim a refundable tax credit of 10%! You may claim the 10% on either your businesses qualified SR&ED expenditures for the tax year it was conducted, or the expenditure limit (usually around $3 million), as outlined in the federal Income Tax Act.

Non-refundable Tax Credits for SR&ED

Non-refundable tax credits are also available for expenditures that exceeds the expenditure limit. These non-refundable credits are also helpful to corporations that are not necessarily eligible for the refundable credit. If you are CCPCs and are not eligible for the refundable SR&ED tax credit, inquire about the non-refundable tax credits available.

The non-refundable tax credit is calculated per the tax year and is 10% of the companies SR&ED eligible expenditure for the tax year that is either less the amount of it’s refundable credit for the given year, or any amount renounced for that tax year.

How Do I Claim My Credit?

You can claim your tax credits with the SR&ED program by completing a SR&ED tax credit form (T666) and submitting the form to your T2  Corporation Income Tax Return, In the form, you can enter the amount of non-refundable tax credits online 659 and the refundable credit on 674 of Schedule 5.

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SR&ED Basics

The Scientific Research and Experimental Development Program (otherwise known as SR&ED) is a program that aims to promote research and developmental work. The program does this by providing federal tax incentives to Canadian businesses of all sizes and in all fields who conduct research and development within Canada. This refundable credit is especially useful for smaller or new businesses or research. These incentives are there to helps foster more research and experimental development within all fields in Canada. SR&ED in Vancouver is a great way to grow and develop experiment research and ideas.

How Much Are You Eligible For?

While the amount is relative, there are a few ballpark amounts you can receive based on your taxable income. Canadian-controlled private corporations with less than $200,000 in taxable incomes may be eligible for a investment credit of 35% that is refundable. The maximum for those who fit into this category is $2,000,000.

Other corporations or partnerships that do not fit into this category may still be eligible for a tax credit of up to 20%.

Think of it this way: if you are a corporation with less than $200,000 in taxable income, for every dollar spent, you will receive 35 cents back in the form of either cash or a tax credit. That is a large amount that will add up, and fast!

You Might Be Eligible For More SR&ED Credits

Some provinces will offer additional credits. These provincial credits are added on top of the original amount, giving you and your corporation more room for exciting research and development projects in Canada. For example, British Columbia will offer an additional 10% credit to research and development projects.

Where To Apply

Companies or individuals alike can apply for the SR&ED program and its incentives, as long as they are taxpayers. First, you must fill out a CCRA T661 form, which includes information such as your annual tax filing. You will need to have proof that these funds were for research and development. A big component for being eligible is that these projects have some degree of risk or uncertainty; the SR&ED program is here to alleviate the potential of risk.