Scientific Research & Experimental Development (SR&ED) is a Canadian federal tax incentive program that is designed to support business-led research and development within Canada. You simply apply to the Canada Revenue Agency (CRA) using supplemental forms with your annual T2 filing, indicating which projects over the past year that you are claiming and allocating all related expenses. Upon approval, you may be eligible for specific tax deductions, investment tax credits (ITCs) and refunds for R&D activities. 

From 2024 to 2025, CRA processed 22,738 claims across Canada and approved a total of $4.5 Billion in ITCs. 

Canadian-controlled private corporations (CCPCs) can expect an ITC and refund of 35% of all eligible expenditures, while other entities (i.e. individuals, trusts, partnerships or public companies) qualify for a basic rate of 15% (ITCs only). Provincial rates vary (i.e. 15% in British Columbia)

Qualified areas of research typically include (but are not limited to) information technology infrastructure development and improvement, innovative software development, engineering science practices and manufacturing processes. 

In order to qualify for SR&ED support, your projects must conform to specific eligibility criteria:

1. Scientific or Technological Uncertainty

There must be an element of uncertainty or risk in the nature of the research that you are engaging in. Project outcomes should not be reasonably predictable or easily referenced through public knowledge or widely-available documentation.

2. Experimental Method or Systematic Investigation

In order to overcome the scientific or technological uncertainty, you must follow a process of experiment or analysis to build, test and measure outcomes that will enable you to refine your approach or draw specific conclusions about the success (or failure) of your initial hypothesis. Quite often, these elements are inherently present in the engineering design lifecycle, but should always be thoroughly documented wherever possible. 

3. Scientific or Technological Advancement

Once you have concluded your experiment or systematic investigation, there must be a clear scientific or technological advancement, such as new knowledge or an improved understanding of design methodologies, system integration or measurable output. Remember that projects do not need to be successful in order to qualify for SR&ED tax credits, failure is a strong indicator that the technological uncertainty was substantial!