... tax back for your research

How much money will I get back? Are the tax credits refundable?

The amount of money you can get back will depend on the type and size of your company, as well as how much money you have invested in eligible SR&ED activities, but a general range can be estimated from the amounts that other companies receive. According to the CRA's brochure Refunds for Small Business R&D:

"Each year, the CRA receives claims from over 11,000 companies participating in the program. Of these, about 75% are small companies whose claims for R&D expenditures generally range from $20,000 to $2,000,000."

More specifically, there are currently two rates of federal investment tax credits on eligible SR&ED costs:

  • a general rate of 20%
  • an enhanced rate of 35% for "qualified" Canadian Controlled Private Corporations (CCPCs)

Canadian Controlled Private Corporations have NOT more than 50% of their shares controlled by "public corporations" or "foreign parties".

"Qualified" CCPCs are those with:

  • prior-year taxable income < $400,000; and
  • prior-year taxable capital employed in Canada under $10 million

The credit rates and the percentage of those rates that are refundable is summarized in the following table (from the CRA's brocure: An Introduction to the Scientific Research and Experimental Development Program):

Business TypeCredit RatesRefundability Rates
Current ExpendituresCapital Expenditures
Proprietorships, Partnerships, Trusts20%40%40%
CCPCs with prior-year taxable income $400,000 or less:
Expenditures up to expenditure limit135%100%40%
Expenditure over expenditure limit20%40%40%
CCPCs with prior-year taxable income between $400,000 and $600,000:
Expenditures up to expenditure limit235%100%40%
Expenditure over expenditure limit20%0%0%
CCPCs with prior-year taxable capital employed in Canada between $10 million and $15 million:
Expenditures up to expenditure limit335%100%40%
Expenditures over expenditure limit20%0%0%
All Other Corporations20%0%0%

Notes:

  1. Expenditure limit is generally $2 million per annum ($3 million after February 25, 2008) for the "associated group of companies" (all companies under common control)
  2. Expenditure limit for CCPCs is phased out for prior-year "group" taxable income between $400,000 and $600,000 for taxation years starting after Jan. 1, 2007 and ending before Feb. 25, 2008, and between $400,000 and $700,000 for taxation years ending after Feb. 25, 2008.
  3. Expenditure limit for CCPCs is phased out for prior-year taxable "group" capital employed in Canada between $10 million and $15 million (between $10 million and $50 million after February 25, 2008). (Note: Ontario and Quebec include foreign or public companies and use ranges of $25 and $50 million for phasing out their enhanced credits to "qualified corporations")