Maximizing SR&ED tax credits for tech companies - R&D partners

Maximizing Government R&D funding

for tech companies

Debbie Frail, P.Eng., MBAdfrail@rdpartners.com

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Can SR&ED help your company?

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• Does your team include creative technical people developing new products / processes?

• Do you test ideas by building prototypes?

• Are you overcoming technical challenges to create new or improved technology?

If you answered “yes” to any of these questions, then the SR&ED program could help fund your project!

SR&ED Program

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SR&ED Program • Encourages innovation and leadership• Subsidizes eligible R&D expenditures• Managed independently within CRA

Best R&D Tax Incentive Program in the World • Canada ranked among the best worldwide

Very Accessible Program for All Companies• Over $3.5 billion Federal funding annually • Over 20,000 businesses each year

SR&ED Project Criteria

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Eligible SR&ED Activities

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Eligible Activities

Core R&D• Design• Engineering• Research

Supporting R&D• Identification, objective setting• Data collecting• Testing

Non-Eligible Activities

Routine Technical Activities• Routine testing • Addition of product features• Quality control

Commercial Activities• Business planning• Market studies• Commercialization

SR&ED Project Timeline

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Tech

nolo

gica

l Unc

erta

intie

s

Time

Product Specifications

Preliminary Studies

Market Validation

Routine Development

Technological Iterations

Aesthetic Modifications

Market Implementation

SR&ED Project

ExperimentalDevelopment

ExperimentalTesting

SR&ED Eligible Expenses

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Admissible SR&ED Project Expenses• R&D employee salaries• Subcontracted R&D (80%)• Materials consumed or transformed • Related overhead (proxy vs. traditional)

Non-Eligible Expenses• Employee remuneration other than salary• Capital expenses• Leasing expenses

Example (small business)

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Eligible SR&ED Expenses:Salaries 100 000 $Sub-contractor fees 20 000 $Materials consumed (testing) 10 000 $Materials transformed (prototype) 20 000 $Total expenses 150 000 $

SR&ED Tax Credit:Provincial Tax Credits 21 000 $Federal Tax Credit 80 500 $Total Tax Credit (67%) 101 500 $

SR&ED Filing Timeline

Income Tax Submission

Fiscal YearEnd

CRA Response

0 to 18 months Up to 4 months

SR&ED Refund

1-4 months

Income Tax Submission

Fiscal YearEnd

CRA Response

0 to 18 months Up to 4 months

SR&ED Refund

1-4 months

Note: Assuming a CCPC and filed with original tax filing, provincial credit to follow (varies by province)

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Application Requirements

• Technical: Brief report per project demonstrating concurrence with SR&ED requirements

• Financial: Cost summary per project

• Tax forms: Professionally prepared and filed within deadlines

• Documentation: List available substantiating documents

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SR&ED Project Evaluation (CRA)

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1.Technological uncertainty that could not be removed by standard practice?

2.Hypothesis developed to attempt to remove uncertainty?

3.Scientific method followed?

4.Technological advancement achieved?

5.Records of hypothesis tested and results kept?

Document, Document, Document:• Project outline: measurable objectives / challenges• Timesheets• Project Logbooks• Monthly reports • Test reports, analysis, conclusions• Contracts with all sub-contracted research

organizations• Invoices with proof of payment• Payroll records and T-4 summaries

SR&ED Best Practices

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R&D Partners

Mission: R&D Partners is committed to providing the highest level of service to meet client needs.

Team: Partners with over 25 years experience, professional engineers and finance/tax experts.

Commitment: We strive to leverage our knowledge base, and work hard to be an efficient and effective member of our client’s team.

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Services

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R&D Partners

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Maximize your government R&D funding, simplify your

life

Contact Us

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Tel. : 800-500-7733Email: info@rdpartners.com

www.rdpartners.com

Debbie Frail, P.Eng., MBA dfrail@rdpartners.com