SR&ED tax credits
The Scientific Research & Experimental Development program is Canada's largest single business innovation incentive. It is also one of the most heavily audited — claims succeed or fail on contemporaneous technical documentation, not retroactive write-ups. Use alongside our SR&ED calculator.
Last reviewed:
Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact CRA. Read our editorial scope →
1. The three criteria (ITA s. 248(1))
- Technological uncertainty — a problem whose solution is not reasonably available to a competent professional in the field.
- Systematic investigation — hypothesis-driven experimentation with planning, testing, recording, and refinement.
- Technological advancement — knowledge that advances the underlying technology base, even if the business outcome fails.
2. What does NOT qualify
- Routine engineering or routine data collection
- Style changes, market research, quality control
- Commercial production, pre-production planning, supply chain
- Most management or commercial software customisation
3. Investment Tax Credit rates
CCPCs: 35% refundable on the first $3M of qualified expenditures (subject to taxable capital and income phase-outs); 15% on the excess (40% refundable on that excess). Non-CCPCs: 15% non-refundable. 2024 Fall Economic Statement proposes increasing the expenditure limit to $4.5M and extending the 35% rate to certain Canadian public corporations — verify enactment status before claiming.
4. Proxy vs traditional overhead
Proxy method: 55% of direct SR&ED salaries treated as overhead — administratively simple, usually higher claim. Traditional method: actual overhead allocation — requires documentation but can exceed 55% in lab-heavy operations. Election is per-year on Form T661.
5. Documentation — contemporaneous, never retroactive
CRA expects: lab notebooks, version control commits, design docs, test plans and results, time tracking by project and individual, technical email trails, screenshots of failed experiments. Claims assembled at year-end without contemporaneous trail consistently fail audit.
6. CRA audit focus
Roughly 20%+ of claims face technical or financial review. Software development claims are the highest-risk category — particularly where the advancement is at the application layer rather than the underlying technology.
7. First-Time Claimant Advisory Service (FTCAS)
Free CRA advisory visit for first-time claimants. Use it. Sets up the technical narrative format that will reduce friction in subsequent years.
8. Provincial credits
Stackable provincial credits add materially: Ontario OITC/ORDTC, Quebec R&D wage credit, BC SR&ED tax credit, Alberta IETC. Combined effective rates can exceed 60% for CCPCs in some provinces.
Last reviewed: