SR&ED Tax Credit Rates by Province: A 2026 Comparison
November 2, 2026
Sector:
Markham, Canada, November 2nd, 2026 – Most SR&ED conversations we have with growing technology companies start with eligibility. For a company that is still deciding where to hire, they should start somewhere else: which province the engineers will sit in, and which legal entity will employ them.
The federal credit is the same everywhere in Canada. The provincial credit layered on top of it is not. Some provinces pay cash, some only reduce tax owing, some pay cash only to Canadian-controlled companies, and three jurisdictions offer nothing at all. For a pre-revenue business, that can be the difference between a refund this year and a carryforward that sits on the balance sheet until the company turns a profit.
The federal credit: 35% or 15%
A Canadian-controlled private corporation (CCPC) earns a 35% investment tax credit (ITC) on up to $6 million of qualified SR&ED expenditures a year. The credit on current expenditures is fully refundable. The $6 million limit applies to tax years beginning after December 15, 2024, and is now enacted.
The limit shrinks as the company grows. It starts to drop once prior-year taxable capital employed in Canada passes $15 million and is gone at $75 million. Associated corporations share a single limit, so a second company does not mean a second $6 million.
The same legislation also opened the 35% rate to eligible Canadian public corporations, with the limit phased out on average revenue between $15 million and $75 million.
Every other corporation earns 15%, and none of it is refundable. That includes most Canadian subsidiaries of foreign parents. Their federal credit only helps once there is Canadian tax to offset.
CCPC status is where we see the most expensive surprises. It turns on control, not just share ownership. A shareholder agreement or option that gives non-residents a right to acquire control can be enough to lose it, and with it the 35% rate. That review belongs before the financing closes, not at year-end.
Provincial and territorial credits at a glance
| Jurisdiction | Rate | Paid in cash? | What to watch |
|---|---|---|---|
| Federal | 35% enhanced, 15% basic | 35% credit: yes for CCPCs and eligible public corporations (40% on capital). 15% credit: generally no | $6M limit shared by associated companies; phased out by taxable capital or revenue |
| Alberta (Innovation Employment Grant) | 8%, up to 20% on spending above the prior two-year average | Yes | Up to $4M of spending; phased out between $10M and $50M of taxable capital; claimed on the Alberta return |
| British Columbia | 10% | Yes for CCPCs and eligible public corporations on up to $6M; otherwise no | Capital expenditures eligible again; credit made permanent in 2026 |
| Manitoba | 15% | Half, for in-house work. All of it, for contracts with qualifying institutes | Non-refundable half carries forward 20 years |
| New Brunswick, Newfoundland and Labrador, Nova Scotia | 15% | Yes | Not limited to Canadian-controlled companies |
| Ontario | 8% OITC, 3.5% ORDTC, 20% OBRITC | OITC and OBRITC yes; ORDTC no | OITC capped at $3M of spending ($240K credit) and phased out on prior-year taxable income and capital; OBRITC only for contracts with eligible research institutes |
| Quebec (CRIC) | 30% on the first $1M above an exclusion threshold, 20% after | Yes | Open to all corporations; separate Revenu Québec claim |
| Saskatchewan | 10% | Yes for CCPCs on the first $2M; otherwise no | Total credits capped at $1M a year |
| Yukon | 15%, plus 5% on payments to Yukon University | Yes | Work must be done in Yukon |
| PEI, Northwest Territories, Nunavut | None | None | Federal credit still applies |
Every provincial credit requires a permanent establishment in the province and SR&ED actually performed there. The rates are headline rates. As the next section shows, they do not stack the way most people expect.
Why the rates don’t simply add up
A provincial R&D credit is government assistance for federal purposes. It reduces the expenditure base on which the federal credit is calculated, so 35% plus 15% is not 50%.
Take $1 million of qualifying current expenditures (salaries, materials and the overhead proxy) incurred in Nova Scotia, where the credit is 15% and fully refundable:
| Metric | Canadian-controlled private corporation | Foreign-controlled subsidiary |
|---|---|---|
| Provincial credit at 15% | $150,000 | $150,000 |
| Federal base after the provincial credit | $850,000 | $850,000 |
| Federal credit | $297,500 at 35%, refundable | $127,500 at 15%, not refundable |
| Combined credits | $447,500 (44.75%) | $277,500 (27.75%) |
| Cash received with no taxable income | $447,500 | $150,000 |
The last row is the one a pre-revenue company should look at. For the foreign-controlled subsidiary, the provincial refund is the only cash that arrives in the first year. The federal credit waits for taxable income.
Note: The example ignores income tax on the credits, other assistance and associated-company limits.
What actually drives the decision
Refundability usually matters more than the rate. A company burning cash on development needs refunds, not carryforwards. A smaller credit paid out this year is often worth more than a larger one the company cannot use for five years. A profitable company sees it differently, because it can absorb non-refundable credits against tax it would pay anyway.
The credit follows the people, not the head office. Incorporating or registering in a province does not earn its credit. The work has to be done there, through a permanent establishment there. Distributed teams are where this goes wrong. If an Ontario company’s developers work from home in Alberta, their time does not qualify for the OITC. Unless the company has a permanent establishment in Alberta, it may not qualify for the Alberta grant either. The federal credit survives; the provincial layer can quietly disappear.
Ownership changes the federal answer more than the provincial one. A foreign-controlled subsidiary earns 15% federally with no refund. Quebec, Ontario’s OITC, Alberta, New Brunswick, Newfoundland and Labrador, Nova Scotia and Yukon still pay cash regardless of ownership, subject to their own size tests. British Columbia and Saskatchewan refund only Canadian-controlled companies, plus eligible public corporations in British Columbia. For a foreign group choosing between provinces, that difference can settle the question.
Capital spending is treated unevenly. Federally and in British Columbia, SR&ED capital expenditures made after December 15, 2024 qualify again. Manitoba never stopped allowing them. Ontario’s published OITC rules still exclude capital bought after 2013. If the plan includes a lab, a pilot line or test equipment, model the capital separately instead of relying on a payroll-based comparison.
Where Kreston GTA LLP comes in
The right province can’t be picked from a rate table. It depends on who owns the company, whether it has taxable income, how the group is structured, where the team will actually sit and what it plans to buy. We look at those together, ideally before the first hire or the first lease, while the answers are still easy to change.
Our SR&ED team brings tax and technical backgrounds to the same file. We model the after-tax recovery under each option, test the ownership and control facts that decide the federal rate, and build the technical and financial support a claim needs when the CRA reviews it.
If you are deciding where to build or grow a Canadian R&D team, we would be glad to walk through the numbers with you before the decision is made, rather than after the first year-end.
This article is general information current to October 2026 and is not tax or legal advice. Eligibility depends on each company’s facts, and rates and rules change with federal and provincial budgets.
