Scientific Research & Experimental Development (SR&ED)

The SR&ED tax incentive program was established to encourage businesses, especially small and start-up firms, to develop new or technologically advanced products or processes. This is a Canadian-wide program, which can also include complementary provincial support.

For many privately-owned companies, this could be worth approximately 41% of eligible expenses, including Ontario tax credits. For large and/or foreign owned companies refunds of 20% are normal. Eligible expenses include a significant portion of labour, material, capital expenditures and sub contractor costs.

Qualifying attributes:

• Process or product development
• Technological uncertainty
• Technological advancement
• Scientific method

Key indicators — project cost overruns, large contractor payments, new capital goods, scientific/engineering staff, R&D department, custom manufacturer, high-tech company.

Is it worth it? For a company with $250,000 of eligible expenses at the 41% level, the refund would be about $100,000. At a net profit of 10%, that is the equivalent of a $1 million sale!

Ontario Interactive Digital Media Tax Credits (OIDMTC)

These credits are available for development of interactive digital media products that educate, inform or entertain using text, sound and images via websites, CD-ROM, DVD-ROM or kiosks.

A 20% refundable tax credit is available based on all costs of development plus an allowance for marketing costs. Claims can go back 24 months and forward 12 months from project completion date.

The criteria for credits include:

• Must have rights to the intellectual property
• Must commercially exploit the product
• Must be developed in Ontario

Key indicators — CD-ROM title development, game development, large programming/graphic arts staff.