Federal Refund Rates for SR&ED
“Canadian-controlled private corporations: Generally, a Canadian-controlled private corporation (CCPC) can earn a refundable ITC at the enhanced rate of 35% on qualified SR&ED expenditures of $3 million. You can also earn a non-refundable ITC at the basic rate of 15% on an amount over $3 million. However, if you are a CCPC that also meets the definition of a qualifying corporation, you also earn a refundable ITC at the basic rate of 15% on an amount over $3 million, and 40% of the ITC can be refunded.” 1
Maximum Federal SR&ED Refund: Running the Numbers
- In the example above line 420 includes the full $3M of expenditures made through the year (This also happens to be the expenditure limit for the enhanced ITC rate).
- 35% of $3M = $1,050,000
- Any expenditures over the $3M are placed in line 430.
- In this example, the expenditures over the $3M limit is $1,255,650 (In this example the overage consists entirely of the PPA that has been calculated) and only 15% of this amount is eligible as an ITC.
- 15% of $1,255,650 = $188,348
The $1,050,000 and $188,348 are combined and the full amount ($1,238,348) is transferred to Part 14 – Refund of ITC for qualifying corporations – SR&ED.
The calculations above detail how the refundable ITC is calculated:
- 40% of the eligible “overage”(15% of $1,255,650 = $188,348) is refundable.
- 40% of $188,348 = $75,339
- The ITCs earned on the $3M at the 35% enhanced rate, is added to the 40% of $188,348. The sum of these two amounts is the total ITCs to be refunded.
- $1,050,000 + $75,339= $1,125,339
Maximum Provincial Amounts
In this article, we only addressed the federal amounts. We would encourage you to look at the maximum amounts at the provincial level as well. For details of provincial R&D tax credit rates across Canada please visit our Provincial R&D Tax Credits – Interactive Map page. We have also summarized all the provincial R&D tax credit programs side-by-side for our readers in our article Provincial Tax Credits – Making the Most of SR&ED.
- Canada Revenue Agency. (March 31, 2021). Scientific research and experimental development tax incentive – Overview: What businesses can earn. Retrieved from: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/overview.html ↩
- SR&ED Investment Tax Credit Policy: Refundable investment tax credit. (August 13, 2021). Canada Revenue Agency. Retrieved from: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/investment-tax-credit-policy.html#s4_0 ↩
- Canada Revenue Agency. (August 13, 2021). SR&ED Investment Tax Credit Policy: Utilizing ITC at the end of the tax year. Retrieved from: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/investment-tax-credit-policy.html#s2_3 ↩