Expertise
Expertise
Innovation
Operations
Technology
ESG

Elevate the performance of your innovation.

Resources and skills IP Box Innovation funding strategy International Tax Optimization Government Grants Innovation Management Tax Incentives
Take advantage of opportunities to optimise your flows and costs and secure your entire value chain..

Purchasing operational advice Purchasing policy and strategy
Blog
Transform your digital challenges into strategic opportunity.

Digital Innovation and Transformation Performance and Operational Efficiency Cybersecurity
To make you an effective and committed actor in the environmental and social transition.

Non-Financial Performance and CSR Strategy Sustainability Report Sustainable innovation strategy Low Carbon Strategy
SR&ED Calculator
Qualified Industries
Qualified Industries
Food industry
Aerospace and Space
Transportation, Logistics
Electronics & Electrical
Manufacturing
Energy
Mining Industry
Engineering
Artificial Intelligence & Software
Video Games
Materials
Chemistry, Environment
Textiles Industry

Food industry
The sector brings together different types of companies such as: agrifood industries, agricultural cooperatives, phytosanitary products, etc.

The Agri-food Industry Examples of eligible activities Case study
Aerospace and Space
The Aerospace and Aeronautics sectors are becoming more and more competitive and are therefore in constant search of innovation.

The challenges Technological issues
Transportation, Logistics
The opportunities for tax relief for R&D in the automotive and transport sectors have increased thanks to significant technological changes in recent years.

The challenges Examples of eligible R&D activities
Electronics & Electrical
The electronics sector is extremely competitive and as a result companies must constantly innovate to maintain their competitive edge.

The challenges Examples of eligible R&D activities
Manufacturing
The manufacturing industry is a key sector of Canadian economic activity. Manufacturing companies operate in an extremely competitive environment and must maintain high level of innovation and strategic R&D investments.

The challenges Examples of eligible activities
Energy
ABGi Canada helps oil and gas companies promote their research and development efforts. Whether a company is developing an underwater system or working to improve development processes, it can benefit from significant public funding.

The challenges Examples of eligible R&D activities
Mining Industry
Canada is a world leader in the mining industry and as such, the sector benefits from dedicated public aid.

The challenges Examples of eligible R&D activities
Engineering
Governments and funding agencies consider engineering to be a science, along with chemistry, biology and physics.

The challenges Examples of eligible R&D activities
Artificial Intelligence & Software
The 4th industrial revolution is led by digital technology. Software publishing or the development of innovative solutions or systems using artificial intelligence are examples of technology that is eligible for subsidies and tax credits.

The challenges Examples of eligible activities
Video Games

The challenges Examples of eligible activities
Materials
The majority of activities undertaken in these sectors will be eligible for the R&D tax credit or other funding mechanisms, such as grants. Companies in this sector continue to be at the forefront of improving product quality and developing new processes in a very competitive environment.

The challenges Examples of eligible activities
Chemistry, Environment
The chemical industry encompasses a wide range of products and applications in several sectors and is used by consumers in all business segments.

The challenges Examples of eligible R&D activities
Textiles Industry
The textile industry is often engaged in innovation and R&D activities, which include the design of new textiles and fabrics to meet stringent product requirements.

The challenges Examples of eligible R&D activities
Resources
Resources
Resources
Testimonials

Testimonials
About Us
About us
About Us

About us
Our History Our Team Our Partners Visiativ
Careers
Contact
en
- fr
- en

Resources Everything you need to now about eligible SR&ED expenses

Blog

Everything you need to now about eligible SR&ED expenses

Introduction

The Scientific Research and Experimental Development (SR&ED) program is one of the most advantageous tax incentives in Canada. It allows businesses to recover a significant portion of their research and development (R&D) expenses.

However, to fully benefit from the program, it’s essential to clearly understand which expenses are eligible. A misinterpretation or omission can lead to a lower refund—or even a rejected claim. This article provides a clear overview of the costs you can include in an SR&ED claim, with concrete examples to help you eliminate any doubts.

What is an eligible SR&ED expense?

According to the Canada Revenue Agency (CRA), an eligible SR&ED expense is one that is incurred directly for conducting scientific research or experimental development activities. It must be reasonable, well-documented, and linked to an eligible activity.

It is crucial to distinguish:

Eligible expenses (related to experimental R&D),
From ineligible expenses, such as marketing or customer support activities.

Link to eligible activities: Only activities aimed at resolving scientific or technological uncertainty can justify these expenses.

Main categories of eligible expenses

Here are the main categories you can include in your SR&ED claim:

Salaries and wages

Salaries often represent the largest share of a claim.

Criteria: Employees must work directly on eligible activities (design, experimentation, prototyping, etc.).
Examples of eligible roles: Engineer, software developer, lab technician.

Concrete example:
An SME allocates a developer 80% of the time to a project optimizing a data analysis algorithm. 80% of their annual salary can be claimed under SR&ED.

Materials consumed

These are materials used during experimental projects.

Examples: Raw materials, electronic components, prototyping parts.
Requirements: The materials must be consumed or irreversibly transformed. They must not be resold.

Subcontracting / third-party contracts

Work entrusted to external providers may also be eligible, under certain conditions.

Requirements: The subcontractor must perform R&D work, in Canada, on behalf of the company.

Concrete example:
A company hires an engineering firm to design and test a new manufacturing process. If the contract is properly documented and related to SR&ED, the expense is eligible.

Overhead and support costs (traditional method)

If you choose the traditional method, you can include:

Rent and utilities (electricity, water),
IT equipment used for R&D,
Office supplies related to research activities.

/!\ Note: These costs are not individually detailed if you use the proxy method (see next section).

Ineligible expenses (to avoid)

Some expenses are systematically excluded from SR&ED claims:

Marketing or graphic design activities,
Costs related to general administration or business management,
Technical support or customer service,
Internal training or non-technical documentation.

These do not aim to resolve technological uncertainty and therefore cannot be reimbursed through the SR&ED program.

Which calculation method should you choose? (proxy vs. traditional)

There are two methods for calculating your SR&ED credits:

Method	Eligible Expenses	Advantages	Drawbacks
Proxy	Salaries + flat-rate uplift (55%)	Easy to apply, less documentation needed	Less precise, no direct costs included
Traditional	All detailed expenses (salaries, materials, rent…)	More tailored, potential for higher return if well documented	Requires more supporting documentation

Tip:

For SMEs, the proxy method is often quicker.
For large companies or complex projects, the traditional method can help maximize the credit.

Practical tips for properly documenting your expenses

Maintaining thorough records is key to a successful claim. Here are some best practices:

Accurate timesheets for each employee involved.
Clear technical justifications for the activities.
Invoices and contracts with subcontractors.
Monthly tracking of expenses by category.

Useful tools:

Excel spreadsheets or specialized tools (ERP, project tracking software),
Time tracking software with SR&ED tagging options.

Conclusion

Understanding and identifying eligible SR&ED expenses is essential for maximizing your tax returns and avoiding errors.

Summary:

Only expenses directly tied to R&D are eligible.
Salaries, materials, subcontracting, and overhead costs can be included depending on the chosen method.
Proper documentation is crucial to justify every expense.

Need help preparing your SR&ED claim?
Our experts can conduct an audit of your projects to identify eligible expenses and secure your refund.

Contact ABGi Canada today.