What is the SR&ED Tax Incentive?

The Scientific Research and Experimental Development (SR&ED) program is Canada’s largest federal tax incentive, designed to encourage businesses of all sizes to conduct R&D and push the boundaries of technology. Whether you are in manufacturing, software, mining, or dental tech, SR&ED provides essential capital to help you recover a significant portion of your innovation costs.

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The Five Pillars of Eligibility

To qualify for SR&ED, your work must move beyond routine engineering to address a fundamental technological uncertainty where a solution is not readily apparent to a competent professional. This process requires a systematic investigation, characterized by the formulation and testing of specific hypotheses designed to overcome these technical obstacles. It is not merely trial and error; it is a disciplined approach consistent with the scientific method—aimed at pushing the boundaries of current industry knowledge through rigorous experimentation and iterative refinement.

The ultimate measure of eligibility is a technological advancement, which is the generation of new information or a significant improvement to existing processes, regardless of whether the project achieves its commercial goals. However, this advancement must be supported by contemporaneous documentation. Keeping detailed, real-time records of your hypotheses, testing phases, and results is essential to proving that a systematic investigation occurred.

 

Key Program Facts

• Failure is an Option: Your project does not need to be a commercial success to qualify. Learning what doesn't work is still considered an advancement in knowledge.

• Not a Grant: This is a tax incentive filed annually with your corporate taxes.

• Strict Deadlines: Claims must be submitted within 18 months of your fiscal year-end.

• Broad Industry Reach: From tool and die to pharmaceuticals, almost any sector that innovates can benefit.

 

How Much Can You Recover?

Your total refund or credit depends on several specific factors related to your corporate structure: