Benefits of the SR & ED Program to Canadian Businesses

Submitted by: leaftech

The Scientific Research and Experimental Development program is designed by the federal government of Canada to encourage businesses to develop new technologies and processes, and expand on current understanding already in place.

The most obvious benefit to this program is that the government offers a tax incentive to businesses who can legitimately claim this type of activity within a fiscal year. These credits can be claimed on wages, materials, some overhead, machinery, equipment and contracts. The tax credit falls under the category of investment tax, as the funds spent on the process in the present are expected to pay dividends in the future (although it is important to note that those conducting scientific research to expand on a current knowledge base without immediately apparent application still qualify).

Private Canadian businesses can earn a tax credit of 35% on the first $2 million spent under the SR and ED program, while other corporations can earn 20% provided the expenditures are incurred within Canada. Private businesses can also expect 20% tax credit on expenditures that exceed the $2 million figure.

Aside from the obvious monetary benefits, use of the SR and ED program will also have results that may at first be intangible. Investing in cutting edge research in a company's area of expertise cannot help but pay off for a company, as the results of the research will yield new products or findings that can help to achieve bigger financial goals in the years ahead. New discoveries may also give the company that achieves it accolades among members of the same industry, allowing for great word of mouth advertising as well as a place in the historical annals of industry.

Finally, as the presence of the program within the federal government suggests, use of the SR and ED program allows Canadian companies a chance to be at the very forefront of the research community; resulting successes cannot but increase the influence of Canada as a nation as well as the economic prospects of all businesses based in the country.

For these reasons, it is beneficial for every Canadian company to determine first of all whether or not it qualifies for the SR and ED program, and to apply for the tax credits if they do. Many companies do participate in the activities which qualify under the program already, and it is important to take advantage of the opportunities offered within it.