Significant Changes to the Scientific Research and Experimental Development (SR&ED) Program are Coming!
December 18, 2024
Sector:
Significant changes to the SR&ED program announced by the Government of Canada on December 13th will have important implications for companies that leverage the program for research and development, increasing the eligible expenditures that companies can claim, including refundability for public companies, reinstating eligibility for capital expenditures and more.
The proposed updates to the Scientific Research and Experimental Development (SR&ED) program, a key initiative designed to support Canadian businesses in their efforts to innovate, develop new technologies, and advance scientific research. The SR&ED program offers tax incentives to Canadian businesses engaged in research and development activities. These incentives aim to reduce the cost of innovation, enabling companies of all sizes to enhance their technological capabilities and foster economic growth. The recent proposed changes aim to streamline the application process, provide clearer guidance, and improve accessibility to the program for a wider range of businesses, particularly small and medium-sized enterprises (SMEs).
Specifically, the government is proposing to:
- Increase the expenditure limit on which the enhanced 35 per cent rate can be earned from $3 million to $4.5 million. As a result, qualifying CCPCs would be able to claim up to $1.575 million per year of the enhanced, fully refundable tax credit;
- Increase from $10 million and $50 million, to $15 million and $75 million, respectively, the taxable capital phase-out thresholds for determining the expenditure limit;
- Extend eligibility for the enhanced 35 per cent refundable tax credit to eligible Canadian public corporations on up to $4.5 million of qualifying SR&ED expenditures annually.
- Restore the eligibility of capital expenditures for both the deduction against income and investment tax credit components of the SR&ED program. The rules would be generally the same as those that existed prior to 2014 and would apply to property acquired on or after the date of the 2024 Fall Economic Statement and, in the case of lease costs, to amounts that first become payable on or after the date of the 2024 Fall Economic Statement.
These reforms will come into force for taxation years that begin on or after December 16, 2024, unless otherwise specified. Further details are expected to be announced in the 2024 Fall Economic Statement. The proposed updates to the SR&ED program are part of Canada’s broader commitment to fostering innovation, creating jobs, and strengthening the economy.
If you have any questions about SR&ED, please reach out to the SR&ED specialists at Kreston GTA.
#taxincentives #SRED #krestongta #governmentofcanada #publiccompanies
Spence Walker, Managing Partner
Dale Wilson, Partner, National Leader, SR&ED and Government Incentives
