SREDdepot.com

Program:

What is the SRED Program?
• Canada Revenue Agency (CRA) administers the SRED program, which is a federal tax

incentive program that encourages Canadian businesses of all sizes, and in all sectors to conduct research and development (R&D) in Canada.

• The SRED program provides cash refunds and/or tax credits for expenditures on eligible

R&D work done in Canada.

• The provincial governments also provide R&D incentives. .

What projects & costs qualify under the program?
• Work that qualifies for SRED tax credits includes:
• experimental development to achieve technological advancement to create new

materials, devices, products, or processes, or improve existing ones;

• applied research to advance scientific knowledge with a specific practical application in

view;

• basic research to advance scientific knowledge without a specific practical application in view; and

• support work in engineering, design, operations research, mathematical analysis,

computer programming, data collection, testing, or psychological research, but only if the work is commensurate with, and directly supports, the eligible experimental development, or applied or basic research.

What does refund submission include?
• An SRED application must contain a technical report with details of development work

carried out, as well as tax schedules, which are included with the tax return.

• CRA has specific guidelines on what projects and approaches are qualified for SRED and

these must be strictly adhered to obtain tax refund.

How Much Can I Receive?
• One important aspect of SRED is that credits are always a percentage of the amount

spent on R & D activities conducted in Canada. Therefore, if your company does not spend very much money, it won't be eligible for much in the way of credits. Entrepreneurs often make the mistake of sacrificing a salary for months, or even years, to help get their company off the ground. This greatly reduces the size of their Scientific Research claim since wages tend to be the biggest contributor to SRED credits. Similarly, companies that do most of their work offshore will not be eligible for substantial SRED claims.

• The greatest SRED benefits are reaped by Canadian-controlled private corporations.

CCPCs can earn SRED tax credits for 35% of eligible expenditures up to the first $2 million. For eligible expenses beyond $2 million, companies can receive credits of 20%. Other Canadian corporations such as public companies, partnerships, trusts, etc. can earn tax credits equal to 20% of qualified expenditures for SR&ED conducted inside Canada.

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