Tax

What is SR&ED?

The Scientific Research and Experimental Development tax credit — Canada's largest federal R&D incentive, returning up to 35% of qualifying expenditures.

SR&ED (Scientific Research and Experimental Development) is Canada's largest federal research and development tax incentive. The program returned $3.2 billion to roughly 17,000 businesses in 2024.

For Canadian-Controlled Private Corporations (CCPCs), the federal credit is 35% refundable on the first $3M of qualifying expenditures per year. Provincial credits stack on top — Quebec adds 30%, creating a combined rate up to 65% on R&D salaries.

What qualifies

Three elements must be present:

Technical uncertainty — the outcome cannot be predicted using publicly known techniques
Systematic investigation — hypothesis, experiment, observation, iteration
Documentation — records of the work performed

Common qualifying activities: custom software development, manufacturing process improvement, prototype testing, formulation experiments, algorithm tuning.

What you can claim

Salaries of employees performing R&D
80% of arm's-length contractor invoices for R&D work
Materials consumed or transformed in R&D
Overhead via the proxy method (55% of qualifying salary)

Filing deadline

18 months from your fiscal year-end. After that, the credit is permanently lost.