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Are payments to acquire rights (eg, royalty payments) ever eligible for SR&ED?

The income tax legislation (ITA subsection 37(4)) is quite clear in stating that "no deduction may be made (...) for an expenditure made to acquire rights in, or arising out of, scientific research and experimental development."

While legislation related to this issue is quite clear, problems in interpretation can still exist where a taxpayer negotiates to pay eligible SR&ED subcontractors by way of royalties rather than immediate cash. (See Ensuring SR&ED eligibility- 'subcontractor' vs. 'royalty' agreements). This illustrates the importance of correctly structuring the legal form of any SR&ED contracts.