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SR&ED program


The program of scientific research and experimental development (SR&ED) is an incentive program to encourage Canadian businesses of all sizes in a variety of sectors to conduct R&D in Canada to develop or improve products or processes (technological advancement).

According to the Income Tax Act, the SR&ED is defined as follows:

« A systematic investigation or research addressing scientific or technological uncertainty by the means of experimentations or analysis »


a) Basic research: work undertaken to advance scientific knowledge without practical application in view;
b) Applied research: work undertaken for the advancement of science with practical application in view.


c)The experimental development work undertaken in the interest of technological advances to create new materials, devices, products or processes or the improvement of the existing ones, even if the attempted improvement is not substantial.

For the purposes of this definition, the following activities are included in the scientific research and experimental development:

The work undertaken by the taxpayer or on his behalf relative to engineering, design, operations research, mathematical analysis, computer programming, data collection, testing and psychological research, where the work is proportional with the needs of the work described in paragraph a), b) or c) that is undertaken in Canada by the taxpayer or for him or used to support them directly.

Types of eligible activities

An activity is eligible when it is performed to get over a technical problem or an obstacle that can only be resolved by the means of experiments.

There are four types of eligible activities. These can consist in creating and / or improving products, or in creating and / or improving manufacturing processes. A project can be classified simultaneously in several of these types of activities according to the work done by the team. For example, when creating a new product, the company may have to improve one of its existing processes.

Three eligibility criteria

1. Technological obstacles

These are the shortcomings and/or limitations of the current state of technology that prevented you from developing the new or improved capacities.

Technological problems and uncertainties that you had to overcome when the company was trying to achieve the technological advancements must be detailed and described.

2. Advancements (technological or scientific)

The research should have been performed to try to reach a new capacity or to allow an improvement over the existing state of knowledge in the field of technology.

The company should have acquired additional technological knowledge as a result of the work, regardless of success or failure of the project.

In other words, the company must reach a technological level higher than the one that existed at the beginning of the fiscal year.

3. Experimental work (scientific approach)

We often hear about a process of trial and error, but an activity of SR&ED should include a systematic investigation consisting in:

1. Formulation of a hypothesis;
2. Verification by experiment or analysis;
3. Formulation of conclusions according to the results.

The method of experimentation or analysis to overcome the technological barriers must be clearly explained.

Examples of eligible activities

  • Formulation of targeted technological advancements (preferably measurable);
  • Steps to overcome technological obstacles;
  • Brain-storming activities, formulation of hypothesis to be validated;
  • Definition of testing protocols, assignment of personnel, definition of priorities, development of technological strategies, quality of materials used, etc);
  • Initial design of products, of processes or equipments;
  • Development of a prototype;
  • Technical documentation for internal use (to be used to support the claim);
  • Experiments and analysis results;
  • Direct supervision of employees;
  • Corrections and modifications;
  • Synthesis of technical results and conclusions;
  • SR&ED support work (engineering, conception, operational research, mathematical analysis, programming, data acquisition, tests, psychological research, etc.).

Examples of non eligible activities

  • Market studies;
  • Research funding;
  • Commercial production;
  • Testing of normal materials, devices, products or processes;
  • Promotion of sales;
  • Changes in style or aesthetics;
  • Quality control;
  • General training;
  • Patent applications;
  • Research in social sciences and humanities.

Main non eligible expenses

  • Legal and accounting fees;
  • Financial expenses;
  • Expenses related to a conference;
  • Licenses and taxes;
  • Facility improvements.

A few numbers

Eligible expenses

Rate of tax credits based on the fiscal situation of the company

  • State-owned or foreign-owned companies are automatically considered a large company.
  • A non-profit company is not eligible for the SR&ED since it does not pay taxes.

Note: This table does not include registered companies.

Percentage of federal and provincial combined tax credits

* The federal credit is not refundable, but applicable only to the tax paid or payable in the context of a large company in federal

Caution : Due to the presence of many exceptions and characteristics in the tax laws, the opinion of an adviser in SR&ED is essential before using these percentages in your calculations of budget estimates.

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