Q. Are SR&ED credits only available to companies in science and technology related fields, such as medical research or mechanical engineering?
No. SR&ED claims are “activity” specific, not “industry” specific. This means that a Canadian company in any industry is entitled to funding provided they have completed an eligible SR&ED activity.
Q. What are eligible SR&ED activities?
Eligible SR&ED activities are those performed by any Canadian business, which contributes to the advancement of scientific knowledge or technology, by creating new or improving upon existing, products, processes, materials or devices.
Q. Does a Research and Development (R&D) project need to be successful to qualify for SR&ED funding?
No. The relative success of an R&D project does not impact the eligibility of a claim. The purpose of the SR&ED Tax Incentive Program is to encourage and advance R &D in Canada, which is in large part achieved through improving upon existing products, processes and methodologies. Successful resolution is not a pre-requisite for eligibility.
Q. Does the R&D activity need to be groundbreaking to be considered for making a SR&ED claim?
No. All that needs to be substantiated is a systematic effort on the part of the claimant to resolve a technological challenge. That is, the only requirement a claimant needs to demonstrate is how they have in some way enhanced the current level of R&D for which the claim is being made.
Q. Can my company apply for SR&ED funding if my application has been denied in previous year(s)?
Yes. Previous applications do not affect the eligibility of your current claim. Your claim is valid provided you can prove that your company has performed eligible R&D activities within the corresponding year. You can file a claim for every year in which your company has been involved in eligible SR&ED activities.
Q. Does Canada Revenue (CRA) favor larger corporations for the SR&ED tax credit program?
No, in fact SR&ED is more favorable for small-to-medium sized Canadian-Controlled Private Corporations (CCPCs). For example, small companies receive a 35% federal tax credit compared to the 15% rate offered to larger corporations.
Q. Are SR&ED Tax Credits part of a government grant program?
No. The SR&ED program is a tax credit program that offers partial financial compensation for eligible expenditures already incurred by your company for scientific R&D as opposed to grants which are paid out in advance.
Q. Will my company be audited as a result of submitting an SR&ED claim?
No. The CRA will only conduct a review of expenditures specifically related to the SR&ED application. That is, CRA reviewers will only evaluate financial information necessary to verify the eligibility of your claim. SR&ED reviews are limited in nature and should not trigger a general audit from CRA auditors.
Q. Will my company have to disclose ‘proprietary’ information?
For the most part, your company should be able to provide technical summaries without disclosing essential proprietary information. That being said, CRA reviewers are also required to follow strict confidentiality protocols in place to protect all sensitive information.
Q. So, what’s the catch?
There is no catch! Remember, the purpose of the SR&ED Tax Incentive Program is to encourage and advance R&D development in Canada. If your company is involved in eligible SR&ED activities and has incurred costs while doing it, then you’re entitled to SR&ED tax credits.
Q. Are U.S. companies eligible for SR&ED tax credits?
Yes, provided they are willing to set up a company in Canada. At SFC, we provide turn-key solutions to assist US companies to set up a Canadian corporation, either an independent or a subsidiary, which will render them eligible for R&D work performed in Canada.
Q. Are U.S. companies entitled to receive the enhanced credit offered to CCPCs?
Yes. We provide full-service organization, accounting, and tax-planning services to US firms, ensuring that these companies will receive the same enhanced benefits as any other CCPC.
Q. Does a U.S. company have to move its entire operation, including personnel, to Canada to claim this benefit?
No. In fact, if the move is properly planned, then the US company may only move minimum (critical) resources to Canada. From a legal standpoint, it is possible to keep all personnel in Canada, while claiming the maximum benefits from this program.
Q. Are international companies outside of the US also eligible to claim SR&ED credits?
Yes! Provided all of the appropriate steps are taken, the process would be very similar to that of a US company.