Transcript Scientific Research & Experimental Development

Scientific Research & Experimental Development
Investment Tax Credit Program
Yukon Research, Innovation and Commercial Conference
Thomas Hu (604) 691- 3832
SR&ED Tax Incentive Program
 a tax incentive program to encourage Canadian
businesses of all sizes to conduct R&D that will lead to
new or improved technologically advanced products or
processes
 largest single source of federal government support for
industrial research and development
 Used by over 21,000 publicly or privately owned
Canadian companies, Partnerships, individuals annually
 Provides ~ $3.3 billion/year in tax credits/cash
 CRA is responsible for administering the SR&ED
program (by HQ + 10 regional offices), while the
Department of Finance is responsible for the legislation
What the Program Offers
• Investment Tax Credits (ITCs) can be:
• offset against federal taxes otherwise payable and/or
refunded
• ITCs of 20% or 35%
• Allowable SR&ED expenditures incurred
(including capital) qualify for immediate write off,
or indefinite carry forward
• Pooling concept for both SR&ED expenditures
and ITC
Requirements
• Claimant must operate a business in Canada in the
taxation year
• Expenditures must be incurred
• SR&ED must be carried out in Canada directly by the
claimant or on his/her behalf
• Certain expenditures for SR&ED performed outside
Canada are now permitted
• The SR&ED must be related to the claimant’s business
• You have to file your complete claim by your Reporting
deadline: the day that is 12 months after the filing due
date of the return of income for the year
What Work Qualifies?

Work must meet the legislative definition
of SR&ED: a systematic investigation or
search that is carried out in a field of science
or technology by means of experiment or
analysis
 Categories:
a. Basic research
b. Applied research
c. Experimental development
d. Work in support
a. Basic Research
work undertaken for the advancement of
Scientific knowledge without a specific practical
application in view



How did the universe
begin?
What are protons,
neutrons, and electrons
composed of?
What is the specific genetic
code of the fruit fly?
b. Applied Research
work undertaken for the advancement of
scientific knowledge with a specific practical
application in view
 improve agricultural crop
production
 treat or cure a specific
disease
 improve the energy
efficiency of homes,
offices, or modes of
transportation
c. Experimental Development
work undertaken for the purpose of achieving
technological advancement for the purpose of
creating new, or improving existing, materials,
devices, products or processes, including
incremental improvements
d. Support Activities
work which is commensurate with the needs,
and directly in support of the work described
above including:
engineering
design
data collection
testing
mathematical analysis
computer programming
operations research
psychological research
Example - Thermodynamics
• Basic Research: D U = Q-W
• Applied Research:
• Experimental Development:
• Support Activity
e. – k. Excluded Work
 Social Sciences or humanities
 Market research or sales promotion
 Quality control or routine testing
 Routine data collection, engineering or
design
 Style changes
 Commercial production or use
 Prospecting, exploring or drilling for, or
producing, minerals, petroleum or natural
gas
Eligibility Requirements
For any research and development work to be
“Eligible”:




The work must be a systematic investigation or search,
The work must be carried out in a field of science or
technology that is not excluded by this legislation,
The work must be carried out by means of experiment or
analysis, and
The work must be undertaken either:
•
•
for the purpose of achieving technological advancement, or
for advancing scientific knowledge.
These requirements must be met for any work to be eligible SR&ED.
Use self-assessment tool @
http://www.cra-arc.gc.ca/txcrdt/sred-rsde/ssssmnt/menu-eng.html
Project Information
A. Field of Science or Technology, date
B. For Experimental Development
• Technological advancements achieved
• Technical Obstacles overcome
• Work performed
C. For Basic or Applied Research
• Scientific knowledge advanced
• Work performed
D. Additional Information, evidence
E. Project Cost
Evidence












Project planning documents
Records of resources allocated to the project, time sheets
Design of experiments
Project records, laboratory notebooks
Design, system architecture and source code
Records of trial runs
Progress reports, minutes of project meetings
Test protocols, test data, analysis of test results, conclusions
Photographs and videos
Samples, prototypes, scrap or other artefacts
Contracts
Others
Project Model
Motivation
Business objectives – Market Research - Constraints
SR&ED
Objective
(Hypothesis)
Eligibility
Requirements Experimentation
Advanced
Technology/
Process
Product/System
Commercial use
Support Work
Strategic Game Software Development
 Initial Planning
 Technical Review
 Initial Themes & Concept
 Mathematics
 Art & Animation
 Build
 Delivery
Eligibility components?
Continuous Manufacturing Process
Eligible or not?
Free Science Access
 Information Packages, Seminars and
Presentations
 First Time Claimant Service
 Pre-Claim Project Review (PCPR)
 Account Executive Service
CRA cannot:
 Provide advanced rulings on projects
 Prepare your claim
Completeness of Forms
 T661E - expenditure
 T2 SCH31
- federal credit corporation
 T2038 (IND)
- federal credit individual
 T666 E
- BC credit corporation
 T2 SCH442
- Yukon credit corporation
 T1232
- Yukon credit individual
 File a complete claim ASAP use the latest forms
 To speed-up the processing of your claim, place
the T661, Schedule 31 and project description on
top of your tax return.
 You have to file your complete claim by your
Reporting deadline: the day that is 12 months
after the filing due date of the income tax return
for the year (don’t miss)
 Different types of claims have different service
standards
 The SR&ED program is committed to meeting
these service standards at least 90% of the time.
CRA Claim Processing
Claim received at the Tax Centre
Completeness Check and Initial Risk Assessment
Claim sent to Tax Services Office
Desk Risk Assessment
Review of Projects (RTA)
Expenditures (FR)
Notice of Assessment
sent to the Claimant
Confidentiality
www.cca-arc.gc.ca/sred
1-866-317-0473