SR&ED is Canada's largest R&D program, and it is currently the most generous it has been in a decade: a Canadian-controlled private corporation now earns a 35% refundable federal credit on up to $6 million of eligible spending a year, before the province adds its layer. Most companies that qualify claim less than they should, because the rules that turn salaries into a claim are technical. This briefing walks through the money, in the order the CRA calculates it.
A Sivanta Solutions briefing
Because the federal enhancement package is now law. For taxation years beginning after December 15, 2024, the enhanced 35% refundable rate applies to the first $6 million of eligible spending, double the old $3 million limit. The taxable-capital phase-out moved to a range of $15 million to $75 million, which keeps far more scale-ups at the enhanced rate as they grow. And capital equipment used for R&D is back in the program after more than a decade out, creditable and refundable at 40% for CCPCs. A company whose last claim was prepared under the old limits has roughly twice the ceiling it used to.
Eligible Canadian public corporations now reach the enhanced 35% refundable rate as well, phased out on average gross revenue rather than taxable capital. Other corporations, foreign-controlled ones among them, earn the basic 15% credit, non-refundable but still real money against tax payable.
Not product development as such. SR&ED pays for work done to resolve scientific or technological uncertainty: problems your team could not solve with standard practice, and had to attack through systematic experimentation and analysis. A formulation that would not stabilize, a process that collapsed when scaled from bench to production, an architecture that failed under real load and had to be rethought, an integration where the documented approach simply did not work. The CRA’s current guidelines set two requirements, not three: the work must have been done for the purpose of achieving a scientific or technological advancement, which it calls the why, and it must have been a systematic investigation or search carried out by experiment or analysis, which it calls the how. Both have to be true of the same work. Routine engineering, styling, and market work do not qualify on their own, but they usually sit right next to work that does, and the craft of claiming is separating the two honestly. Our three-minute screener applies this test to your situation.
Salaries first. Wages of employees directly engaged in the eligible work are the heart of nearly every claim, allocated person by person as a share of their time. Timesheets are ideal, but calendars, commit histories, lab notebooks, and project records can support a defensible allocation where formal tracking never existed. Owners with 10% or more of any share class are claimable too, with caps: their eligible salary is limited to five times the year's maximum pensionable earnings, and bonus-based amounts are excluded.
Then the multiplier. Rather than tracking every overhead dollar, almost every claimant elects the proxy method: a flat 55% of the eligible salary base is added to the claim as a stand-in for rent, utilities, and support costs. No receipts, no studies. It is the single most misunderstood lever in the program, and the reason a dollar of employee R&D is worth more than a dollar of contracted R&D, because the proxy is calculated on salaries only.
Contractors at 80%. Payments to arm's-length Canadian contractors for SR&ED performed on your behalf count at 80% of the eligible portion of the contract. The work must happen in Canada, the contractor must not claim it themselves, and the SR&ED share of each contract has to be identified rather than sweeping in whole invoices. Foreign contractors are generally out.
Materials and equipment. Materials consumed or transformed in prototypes, trial batches, and test runs count at cost, and since the 2026 changes, equipment purchased primarily for R&D use earns the credit again.
$400,000 of eligible salaries + $220,000 proxy (55%) + $100,000 of arm's-length contracts counted at 80% ($80,000).
Federal base: $700,000. Federal credit at 35%: $245,000, in cash, even if the company paid no tax.
Add Quebec's CRIC on top, and total recovery commonly lands between 50 and 60 cents per salary dollar.
Nearly every province layers its own credit on the same expenditure base, and the layers interact: the provincial credit reduces the federal base, which is why the combined rate is never a simple sum, and why the province belongs in the claim plan from the start.
| Province | Credit | What to know |
|---|---|---|
| Quebec | CRIC: 30% then 20% | 30% on the first $1M above an exclusion threshold (the greater of $50,000 or $18,571 per employee), 20% beyond, fully refundable for every company size. Arm's-length subcontractors count at 50%. Applies to years beginning after March 25, 2025. |
| Ontario | 8% + 3.5% | The OITC's 8% refundable credit on up to $3M of spending, phasing out at higher income and capital, plus the ORDTC's 3.5% non-refundable credit that applies broadly. |
| British Columbia | 10% | Refundable for CCPCs up to a $3M annual refund cap. |
| Alberta | 8% | The Innovation Employment Grant, on up to $4M of spending, with a bonus on growth in R&D spending. |
| Saskatchewan | 10% | Refundable up to $1M of credit per year for CCPCs. |
| Manitoba | 15% | Half refundable; fully refundable when the R&D is done with an eligible institute. |
| NS, NB, NL, Yukon | 15% | Refundable. |
Comfortably, with one rule at the centre: government assistance received for the same work is deducted from the SR&ED base before the credit is calculated. IRAP contributions, Mitacs internships, and wage subsidies such as SWPP all reduce the base for the dollars they touch. That is no reason to skip them; a grant dollar now beats 35 cents of credit later. It is a reason to model the combination before applying, so a grant on the same salaries does not quietly eat the claim. Sequenced properly, a company can hold IRAP funding, student subsidies, and a full SR&ED claim in the same fiscal year.
Three habits, none of them complicated. Narratives that describe the technological problem rather than the product, because the CRA funds the uncertainty and the investigation, not the feature list. Contemporaneous evidence, tickets, commits, test data, batch records, design iterations, collected during the year rather than reconstructed at filing. And time allocations somebody can actually explain, because round numbers with no logic behind them are the fastest way to turn a routine claim into a reviewed one. One deadline stands over all of it: SR&ED must be filed within 18 months of the fiscal year-end, with no extensions, so a company that has never claimed can usually still rescue its most recent completed year.
The claim rides with the corporate tax return: Form T661 carries the technical narratives and the expenditure detail, Schedule 31 computes the federal credit, and the provincial schedule computes the provincial layer. The CRA accepts most well-prepared claims as filed; a minority are selected for review, where the technical narrative and the records behind the numbers do the talking. Our practice is to prepare every file as if it will be the one reviewed, which is precisely what makes reviews uneventful.
Run your projects through the screener in three minutes, or book a short meeting and we will go through your work and your numbers together. If it does not qualify, we say so at the first call, for free.
Check your eligibility Book a free callRelated reading: the SWPP student hiring subsidy · the full program directory · Grant Finder
Rates and thresholds reflect legislation and published CRA and provincial guidance as of the most recent federal and provincial guidance, including the federal changes for taxation years beginning after December 15, 2024. Figures are simplified for readability; federal-provincial interaction depends on your facts. This briefing is general information, not tax advice on a specific claim.
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