The purpose of the Scientific Research and Experimental Development Tax Incentive Program (SR&ED) is to encourage Canadian businesses to conduct their research and development (R&D) activities here in Canada. These incentives include:
- Investment tax credits
- Deductions against income
- Tax refunds
Depending on your circumstances, the SR&ED program may allow you to reduce your Canadian income tax liability by deducting your research and development costs against your current years’ income tax, or defer them to offset income in a future year.
The tax credit will be between 15% and 35% of your qualified SR&ED expenditures. Unused income tax credits can be carried forward as long as 20 years.
You may qualify for an SR&ED incentive if your business activities include any of the following:
- Research and development towards creating new devices, materials, processes or products, or the improvement of existing ones;
- Applied scientific research towards a specific practical application;
- Basic research to improve scientific knowledge, even without a specific practical application in mind;
- Research in engineering, design, operations research, mathematical analysis, computer programming, data collection, testing, or psychological research. However, to qualify for the credit, the work must directly support and be commensurate with the applied or basic research or the eligible experimental development.
You must apply for the benefit 18 months from the end of the tax year in which you invested money into R&D.
For more information, see here.
How we can help
LedgersOnline’s staff of experienced bookkeepers and accountants can help you stay on top of all your R&D transactions and properly categorize your expenses. When your books are in order, it’s much easier to engage in proper tax planning strategies, and to file your taxes with the CRA accurately and on time.
This helps you minimize your net tax burden and maximize your available SR&ED tax benefits and ultimately your profits.
Reliable accounting services for your business
As Canada’s leading virtual bookkeeping and accounting services form, LedgersOnline can help you make the most of your SR&ED tax credits – improving your cash flow, profitability, and competitiveness. Contact us or learn more about our reliable bookkeeping services to see how we can help you with your year-end taxes and tax planning.