4 Reasons Why You Should Apply for SR&ED

Funding Program - SR&ED - Tax

For all kinds of businesses in all sectors, the SR&ED program is created to encourage and support them to explore and experiment with technological projects. However, there are also plenty of similar programs offered by the Canadian Government. What makes SR&ED stand out? Let’s dive into four major reasons why your company should apply for SR&ED.

High Government Budget

The federal government of Canada has been providing over $3 billion each year for SR&ED since 1986. The overall credit could become $3~$4 billion if the provincial support is added, and it makes SR&ED one of the most generous government funding all around the world.

The high government budget allows for more applicants and as a result, nearly any Canadian-controlled private corporation (CCPC) is eligible to receive the tax credit based on the qualified expenditures that are used to carry out research and development (R&D) activities within the country.

Short Processing Time

A common misunderstanding on SR&ED is that lots of people believe it may take years to see any benefits coming from SR&ED. However, the reality is that companies don’t need to wait for their projects to become successful as long as they plan, execute and document their R&D efforts and attempts to work toward a breakthrough. After the application, companies would likely hear from the government within 6~8 weeks. If they receive approvals or are invited to join the First-Time Claimant Advisory Services (FTCAS) from the CRA, companies can benefit from the money in another 6~8 weeks.

A Tax Credit Program

Generally speaking, there are three most common types of government funding awarded to businesses:

  • Grants
  • Loans
  • Tax credits

To secure a grant, companies must first complete a funding application and obtain the government’s approval before beginning their projects and incurring expenses.

For loans, there might be some decreases in the rate, but in the end, companies still need to repay the money to the government.

In contrast, tax credits like SR&ED reduce a business’ income tax payable and can be fully or partially refundable. They result in a cash reimbursement after submitting the proper tax forms to the government. According to the statistics, companies who apply for SR&ED can receive about 60.56% cash reimbursement and 4.99% tax credit in Ontario.

Continuous Application

Last but not the least, if several ongoing projects are eligible for SR&ED, you can claim all of them in one fiscal year. On average, companies can continuously claim one single project for 3~5 years.

As a consequence, the government wishes to help companies, especially SMEs to innovate through SR&ED by covering the whole project from scientific research to final implementation. In the face of future uncertainty, SR&ED can bring cash to companies as soon as possible and support them to continue investing in related projects.

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