During the late 1990′s the Canadian government created a tax program known as the Scientific Research and Experimental Development program (SRED). The SRED Canada program was created by the government, but it’s operated by the Canadian Revenue Agency. The program was developed so as to promote technological as well as scientific innovation, research and development by Canadian individuals and businesses. This program doesn’t discriminate according to size, so all companies can qualify for the incentive program.

It is the main contributor to technological as well as the scientific innovation within the Country today. It was developed to promote growth in those industries by encouraging more businesses and individuals to participate and invest in these fields. It also serves as an enticement for direct foreign cash inflows into Canada.

As previously stated, any individual or size of company can qualify for the incentive, whether small, medium, partnership, or corporation. Companies and individuals that qualify for the program will either receive deductions on their taxes, or they will receive cash refunds from country’s Revenue Authority.

The amount of the refunds and/or deductions is calculated by the expenditure of the firm or individual in Canada. For instance, a company could receive a cash refund on the cost of equipment that they purchased in that tax year. However, it is not easy to be able to qualify for this tax break because not just any company or individual can claim this.

Firstly, the company or individual should have done some kind of work. Broadly speaking, the work and development must be in the sphere of science and/or technology. It is not possible, for example, within the field of the humanities.

Other types of work and businesses that do not qualify for the tax incentive include those who are in areas of sales and marketing. Research work does fall into the types of eligible work. However, it must be within the area of technology and science. Also, the research ought to have contributed to knowledge production.

Proponents of this program state that not only does it encourage direct foreign investment, but it also encourages entrepreneurship. Because most of the companies that are awarded are small businesses, 75 percent of the refunds and deductions have gone to small companies. Since the inception of the program, 4 billion dollars worth of taxes have been refunded or deducted every year. However, there are some critics of this incentive program.

There are some critics who say that this program does not really work. The World Economic Forum has listed Canada very low on the list of innovative countries. On the other hand, those in favor of the SRED Canada program point out that the nation has awarded refunds and tax deductions to the tune of 4 billion dollars a year since the program was implemented in the late 1990′s. Also, the program boosts small business as 75 percent recipients of the tax break are small businesses.

If your business is interested in this program, contact a SRED consultants and ask how does the SR&ED claim program can benefit for you!

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