In today’s competitive market, companies must focus their resources towards delivering products and services that meet or exceed their clients’ expectations. Most companies lack the internal resources to deal effectively with the numerous requirements of the SR&ED program. As a result, eligible projects and/or expenses could be overlooked when preparing tax credit claims, thereby reducing the tax credits that the claimant should receive. Successful claims require a thorough understanding of the various criteria, administrative procedures, and nuances as to how the governments apply the rules.
The federal Scientific Research and Experimental Development (SR&ED) tax incentive program encourages Canadian and foreign businesses of all sizes and in numerous industry sectors to carry out SR&ED in Canada. This program is the main source of federal support for industrial-based SR&ED.
Claimants may request SR&ED tax credits for expenses such as salaries, materials, subcontracts, and overhead expenses.
In general, Canadian-controlled Private Corporations (CCPC) can obtain an investment tax credit (ITC) of 35% for the first $3 million of qualified expenditures for SR&ED carried out in Canada and 15% of all qualified expenditures in excess of $3 million.
Other companies incorporated in Canada, sole proprietorships, partnerships, and trusts can obtain an ITC of 15% of qualified expenditures for SR&ED conducted in Canada.
It is important to understand the SR&ED program’s different criteria, exceptions, and the policies used by the government in the administration of the program.
RTC Consulting has extensive knowledge, experience, and a broad understanding of the program’s criteria. The implementation of this know-how allows us to quickly and effectively prepare claims that optimize results so as to maximize our client’s tax credit benefits.
At the federal level, the SR&ED must be carried out in Canada and the SR&ED must be related to the claimant’s business activities.
At the provincial level, the claimant must claim expenses in the province that is providing the SR&ED tax credit benefits.
The claimant must be incorporated in Canada.
The CDAE is a provincial tax measure designed to consolidate the development of information technologies (IT) throughout Quebec. It enables specialized corporations that carry out innovative, high-value-added activities in the IT sector to obtain a tax credit of an annual maximum of $25,000 per eligible employee.
A corporation qualifies if its activities are primarily in the design of software that affects business processes and if those activities are carried out through a Quebec-based establishment. The company must derive its revenues from sources that are directly related to E-business. The claimant is also required to have had, throughout the taxation year, a minimum of six full-time employees who conduct eligible work. To apply for this tax credit, a company must submit their claim to Investissement Québec who will determine whether the company is eligible. Investissement Quebec will issue attestations for both the company and employees provided they meet several eligibility criteria.
Information technology (IT) consulting services related to technology, to systems development, or to E-business processes and solutions that the company sells to a third party are eligible. However, the services must relate to the development, integration, maintenance/evolution of information systems, to technological infrastructures, or to the design/development of e-commerce solutions. Activities related to the development of security and identification services are also eligible.
The Private Partnership Pre-Competitive Research program is designed to encourage companies in the same industry sector or in related sectors to establish technology partnerships in order to reduce technological risks and SR&ED project costs.
To qualify for the tax credits, a claimant must have a Quebec-based business, jointly undertake an SR&ED project with one or more unrelated corporation(s), and develop pre-competitive technology expertise.
Each partner is entitled to a refundable tax credit rate of 30%, which applies to all qualified expenditures. These tax credits are earned based on the expenses incurred in Quebec for all PPPR projects carried out during the claimant’s taxation year.
All approved project expenses are subject to the 30% tax credit rate without being limited by the annual $3 million expenditure limit.
The project eligibility criteria of the PPPR program are similar to those of the SR&ED program (see Claiming SR&ED Tax Credits /Eligibility Requirements)
Just as for SR&ED claims, RTC Consulting has the expertise required to prepare and deliver excellent results for our clients filing PPPR claims. To date, all projects filed for PPPR tax credits have been approved by the Quebec government.
The tax credit for the production of multimedia titles is administered by Investissement Quebec and is designed to provide tax credit incentives to businesses in the video gaming or entertainment software industry. This refundable credit can represent 26.25% to 37.5% of salaries, depending on the nature of the title and its availability in French.
A company that operates a business established in Quebec is eligible for this credit as long as it is not a Crown-controlled or a non-profit corporation. It is not necessary for the company’s main activity to be the production of multimedia titles in order for it to be eligible for the credit. However, the company must obtain an initial eligibility certificate for the multimedia title and an annual production work certificate for the duration of the work related to the multimedia title. Both certificates are issued by Investissement Quebec.
Eligible activities include all the pre-commercialization work required to produce the title and the post-commercialization work required to maintain or update the title and to manage its user groups. Activities relating to the production of the title’s digital support, its promotion and its distribution are excluded. The credits apply only to labour expenses. The calculation of eligible expenses is dependent on whether eligible activities were carried out internally or through subcontracts: When activities are undertaken internally or by a related subcontractor, all salary expenses are eligible for the tax credit. When activities are carried out by a non-related subcontractor, only 50% of the amounts invoiced to the company are eligible.
Whether it is your first claim or whether you are looking for a second opinion, we can evaluate your tax credit applications. If we do file a tax credit claim, our fees can be determined based on the tax benefits received. No tax benefits, no cost to you!
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| Provinces | Provincial credit rate1 | Provincial credit refund?1 | Federal credit rate | Federal credit refund? | Combined credit rate1 |
|---|---|---|---|---|---|
| ALBERTA | 10% | YES | 35% | YES | 64.3% |
| BRITISH COLOMBIA | 10% | YES | 35% | YES | 64.3% |
| MANITOBA | 10% | YES | 35% | YES | 64.3% |
| NEW BRUNSWICK | 15% | YES | 35% | YES | 69.4% |
| NEWFOUNDLAND & LABRADOR | 15% | YES | 35% | YES | 69.4% |
| NOVA SCOTIA | 15% | YES | 35% | YES | 69.4% |
| ONTARIO | 8%+4.5% | YES/NO | 35% | YES | 66.5% |
| PRINCE EDWARD ISLAND | N/A | N/A | 35% | YES | 54.3 |
| QUEBEC | 30% | YES | 35% | YES | 73.75% |
| SASKATCHEWAN | 10% | NO | 35% | YES | 64.3% |
| NUNAVUT | N/A | N/A | 35% | YES | 54.3% |
| NORTH WEST TERRITORIES | N/A | N/A | 35% | YES | 54.3% |
| YUKON | 15%/20% | YES | 35% | YES | 69.4%/74.4% |
1 Certain conditions may apply, causing the rate to vary. The tax credit rates are based on salary expenses and the use of the proxy method. For more information call us at : (514)633-6888 or via email at info@rtc-consultants.com.
| Provinces | Provincial credit rate1 | Provincial credit refund?1 | Federal credit rate | Federal credit refund? | Combined credit rate1 |
|---|---|---|---|---|---|
| ALBERTA | 10% | YES | 15% | NO | 36.4% |
| BRITISH COLUMBIA | 10% | NO | 15% | NO | 36.4% |
| MANITOBA | 10% | YES | 15% | NO | 36.4% |
| NEW BRUNSWICK | 15% | YES | 15% | NO | 43% |
| NEWFOUNDLAND & LABRADOR | 15% | YES | 15% | NO | 43% |
| NOVA SCOTIA | 15% | YES | 15% | NO | 43% |
| ONTARIO | 4.5% | NO | 15% | NO | 29% |
| PRINCE EDWARD ISLAND | N/A | N/A | 15% | NO | 23.3% |
| QUEBEC | 14% | YES | 15% | NO | 35.2% |
| SASKATCHEWAN | 10% | NO | 15% | NO | 36.4% |
| NUNAVUT | N/A | N/A | 15% | NO | 23.3% |
| NORTH WEST TERRITORIES | N/A | N/A | 15% | NO | 23.3% |
| YUKON | 15% | YES | 15% | NO | 43% |
1 Certain conditions could apply, causing the rate to vary. The tax credit rates are based on salary expenses and the use of the proxy method. For more information call us at : (514)633-6888 or via email at ; info@rtc-consultants.com.