the Canadian government provides an estimated $ 4 billion in refunds and tax tools to Canadian businesses that create new products, improve products they already produce, change processes, and upgrade their software.
How do these companies gain access to these much-needed investments?
About 20 years ago, the Canadian Revenue Agency (CRA) developed the Computer Science Research and Research (SR&ED) program to promote technological advancement in Canadian companies. The SR&ED program provides credit and tax incentives for companies doing any type of Research and Development in Canada. This system reimburses companies for the money they have already spent – in the general sense, the government is compensating your company for building and improving the products you have been working on anyway.
Not a bad idea, eh? But just how much can you get?
As part of the SR&D program organization, if your business is a small and medium-sized company operating in Canada, you can earn up to 72.1% on reasonable labor costs – that is the time you spend working on developing new or growing existing products and processes. And that’s not all – most provinces in Canada also offer provincial tax credit, which ranges from 10% to 35%.
So how does a company know if it’s worth the SR&ED program?
There are three ways to qualify for the SR&ED program: Technological uncertainty, technological advancements and technical content.
Technological uncertainty means that there is an obstacle that has no known solution to solve the problem. Everything that is ready for the program must surpass existing information while removing uncertainty.
Technological Advances means that uncertainty was resolved, and that your knowledge and understanding of the technology used has improved.
technical content, or systematic investigations, suggests that some kind of scientific process was used when solving technical uncertainties.
Sounds easy, doesn’t it? You start with the last goals you don’t know how to get to – or even get to – do some experiments trying to reach that final goal, and then come back to everything you know more than you did before.
As simple and straightforward as it sounds,
the CRA estimates that about 50% of SR&D eligible companies actually do not make their application – especially since you don’t see that what they are doing can actually be considered Research Science and Experimental Development. So, ask yourself – have you created a new product? Better already? Change the process? If you have, there’s a good chance that you are missing out on a refund plan that could give your company the much-needed cash.