Alright, you’ve built a great product. You’ve maximized the other tax credits that are available to you. But what about that last – but critical step… getting it to market?
Successful marketing is difficult, and can be one of the biggest challenges facing your company. It can therefore be one of your biggest costs, and because of this, it is important to recognize which funding sources include marketing as an eligible expense.
Are Your Marketing Costs Eligible for Funding?
Let’s look at an common example. Your company creates educational software applications for mobile platforms, and your product is innovative, therefore qualifying for SR&ED – great! If however, you hired a designer for the front end development and a marketer to help push it out to potential customers, none of his or her time is eligible for SR&ED – but these costs may be eligible under other programs. Here are some of the major sources of funding for the software industry, along with relevant breakdowns of eligible costs:
|Funding Program||Eligible Costs||Return Percentage|
|Ontario Interactive Digital Media Tax Credit (OIDMTC)||Production and development, marketing and distribution, some administrative overhead.||40%|
|Intellectual Property Development Fund||Production and development, marketing and distribution, equipment, some administrative overhead.||30%|
|Scientific Research and Experimental Development (SR&ED) Tax Incentive Program||Production, development, and research, some equipment, materials.||35%|
|Canadian Media Fund – Experimental Stream||Production and development, marketing and distribution, equipment, administrative overhead.||up to 75%|
|National Research Council – Industrial Research Assistance Program (NRC-IRAP)||Salaries for production and development, marketing and distribution, administrative. (All Salaries which contribute to “develop technologies” and “successfully commercialize” them.)||75-100%|
|Innovation Demonstration Fund (IDF)||Production and development salaries and Equipment.||$100,000 – $4,000,000|
Know Your Options Before You Spend
Notice that SR&ED and IDF do not include any marketing costs; however, educational / promotional websites may be included in the other programs listed above as a marketing expense. Knowing where you can recover your costs can help determine how to allocate resources and ideally should be taken into consideration before incurring expenses to ensure that eligibility criteria are met.
The Importance of Creating a Plan
The question is whether the program is still worthwhile applying to, once the eligible expenses have been isolated. Questions like this are easy to miss. As with anything else in business, a well thought out plan is the best thing you can do to increase your chances of success. Even if you don’t have many marketing expenses, it’s important to find funding where your major costs are eligible—it’s a matter of finding what’s best for you.
Hiam, Alexander. Marketing Kit For Dummies. (3rd ed.) p. 1-15. Retrieved 2010-07-15.
Kotler, Philip; Gary Armstrong, Veronica Wong, John Saunders (2008). “Marketing defined.” Principles of marketing (5th ed.) p. 7. Retrieved 2010-07-15.
Ontario Media Development Corporation. “Ontario Interactive Digital Media Tax Credit.” Retrieved 2010-07-15. Web: http://www.omdc.on.ca/Page3400.aspx.
Scientific Research and Experimental Development (SR&ED) Tax Incentive Program. Retrieved 2010-07-15. Web: http://www.cra-arc.gc.ca/sred/.
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