18 December 2002 Internal T.I. 2002-0178237 - CLINICAL TRIALS MATERIAL

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Whether the cost of clinical trials material is deductible under subsection 37(1) or (2) of the Act.

Position: Depends on the particular situation.

Reasons: Question of fact.

		December 18, 2002

	Mel Machado	HEADQUARTERS
	Financial Legislative Application Section	James Gibbons
	SR&ED Directorate	(613) 957-2135

		2002-017823

Clinical Trials Material (CTM)

We are writing to confirm our discussions of November 22, 2002. In our memo to you dated October 29, we opined that the cost of CTM preparation by a Canadian corporation (Canco) in a situation where the clinical trials are conducted outside of Canada by a foreign corporation would not be deductible under subsection 37(1) or (2) of the Income Tax Act. As a follow up, you have asked us whether Canco would be entitled:

(i) to a deduction under section 9 of the Act for the cost of CTM preparation; or

(ii) to a deduction under subsection 37(1) of the Act for the cost of CTM preparation in a situation where Canco undertook all stages of the development of a drug, including the clinical trials, in Canada.

We confirm that, in our view, Canco would not be entitled to a deduction under subsection 37(1) or (2) if the clinical trials were not performed by Canco in Canada. However, we agree that some or all of the CTM expenditures may be deductible under section 9.

In the situation where Canco undertakes all stages of the development of a drug including the clinical trials (as described in (ii)), we believe that Canco would be entitled to a deduction under subsection 37(1) of the Act for the cost of CTM preparation.

Daryl Boychuk, LL.B
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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