Understanding the New SR&ED Tax Incentive Program Changes

December 16, 2024

The government of Canada has introduced significant updates to the Scientific Research and Experimental Development (SR&ED) tax incentive program in its latest Federal Budget on December 13, 2024. These changes are designed to better support businesses conducting research and development, encouraging innovation and economic growth. Here’s what you need to know about the updates.

1. 1. Increased Expenditure Limit

Previously, businesses could earn 35% refundable tax credit on qualifying SR&ED expenditures up to $3 million. This limit has now been raised to $4.5 million, allowing Canadian-Controlled Private Corporations (CCPCs) to claim up to $1.575 million annually. This increase provides greater support for businesses investing heavily in R&D.

2. Expanded Taxable Capital Phase-Out Thresholds

The taxable capital thresholds, which determine eligibility for credit, have been significantly increased. The lower threshold rises from $10 million to $15 million, while the upper limit increases from $50 million to $75 million. This change ensures more mid-sized businesses can benefit from the enhanced credits.

3. Eligibility Extended to Public Corporations

For the first time, Canadian public corporations can claim the enhanced 35% refundable tax credit on up to $4.5 million of SR&ED expenditures annually. This expansion aims to stimulate innovation across a broader range of industries and company types.

4. Restoration of Capital Expenditure Eligibility

A significant shift is the return of capital expenditures as eligible costs under the SR&ED program. Capital expenditures related to R&D activities, including the cost of property and certain lease expenses, will once again qualify for both tax deductions and investment tax credits.

These updates are a game-changer for Canadian businesses. They make the SR&ED program more accessible and valuable, especially for companies scaling their R&D efforts. By increasing financial support and expanding eligibility, the government is fostering a stronger innovation ecosystem while helping companies manage costs and remain competitive globally.

Work with experts at ABGi Canada to review your R&D budgets and assess how the increased limits and restored capital expenditure eligibility can optimize your tax credits. Let us help you maximize your claims, ensuring you take full advantage of the new opportunities provided by the SR&ED program.