SR&ED Tax Credits in the Fintech Sector
By admin
Published On March 27, 2018
What is SR&ED?
The Scientific Research and Experimental Development (SR&ED) Program is a federal tax incentive program designed to encourage Canadian businesses of all sizes and in all sectors to conduct qualifying research and development (R&D) in Canada.
$3.6B annually for over 23,000 claims
The definition given in subsection 248(1) of the Income Tax Act can be summarized as …a systematic investigation or search carried out in a field of science or technology by means of experiment or analysis… to advance scientific knowledge or to achieve technological advancement.
- Financial Services are often excluded from SR&ED claims
- Our sector-specific expertise allows us to identify eligible activities at the underlying technology level and detach the actual advancements from the product/service being developed.
Benefits for Large Corporations
For large corporations, the ITC rate is 15%. However, SR&ED activities in a CCPC may qualify for an enhanced ITC rate of 35%. A CCPC’s eligibility for the enhanced 35% ITC rate will depend on its taxable income for the previous year, aggregated with the taxable incomes of any associated corporations.
In addition to the federal tax incentives, many of the provinces have their own SR&ED tax incentives.
Take, for example, an Ontario corporation with the following SR&ED Expenses:
| Salaries |
$100,000 |
| Overhead/Proxy (55%) |
$55,000 |
|
Contractors (80%) |
$8,000 |
| Materials |
$10,000 |
| Total SR&ED Exp. |
$173,000 |
The corporation could receive the following refunds and/or credits:
|
Non CCPC |
CCPC |
|
| Provincial | ||
|
OITC (8%) |
$13,840 |
|
| ORDTC (3.5%) |
$6,055 |
$5.570 |
| Federal | ||
|
ITC (15%) |
$24,042 |
|
|
ITC (35%) |
$53,756 |
|
| Total |
$31,097 |
$73,166 |
Credits can be carried forward 20 years and claims must be filed within 18 months of the fiscal year end.
The Braithwaite Experience
We align our technical and scientific expertise with each client’s area of science/technology through a multi-disciplinary team whose members average 15 years SR&ED experience.
Our combined technical, financial, industry and regulatory experience allows us to maximize and defend claims. Our team is empowered to share and collaborate with all key stakeholders so that SR&ED claims are audit ready.
Our Services:
- Full claim preparation services from scoping to CRA review & acceptance.
- SR&ED tax planning for CCPCs
- Technical or Financial review only
- CRA audit defense assistance
- SR&ED consulting, process transformations
- Due diligence reviews
Grants and Incentives
Several Programs at Federal and Provincial level aim to boost innovation in the Fintech Sector. Our extensive searchable database can identify the most suitable opportunities for non-equity-diluting funding options.
Some of the current programs offering support for the FinTech sector:
- OCE
- NRC– IRAP
- MITACS
- MaRS
- FedDev
For further information on the Fintech Sector, please contact us today.
