SR&ED Investment Tax Credit Policy
Disclaimer
We do not guarantee the accuracy of this copy of the CRA website.
Scraped Page Content
SR&ED Investment Tax Credit Policy
Date: December 18, 2014
Revisions to the SR&ED Investment Tax Credit Policy document
Reasons for revision
This revision accommodates the legislative changes that have been announced.
Revision overview
The basic 20% investment tax credit (ITC) rate earned on qualified SR&ED expenditures is reduced to 15% for tax years that end after 2013. For tax years that include January 1, 2014, the reduction in the basic ITC rate is pro-rated based on the number of days in the tax year that are after 2013.
The text of this document has been revised to reflect these changes, see Appendix C.1 Explanation of changes.
Table of contents
- 1.0 Purpose
- 2.0 Legislation
- 3.0 Determining the enhanced rate – 35%
- 3.1 Determining the expenditure limit
- 3.1.1 Reductions to the expenditure limit
- 3.1.2 Effect of short tax years on the expenditure limit
- 3.1.3 Allocation of the expenditure limit for associated Canadian-controlled private corporations
- 3.1.4 Determining the expenditure limit for associated corporations with multiple tax years in a calendar year
- 3.2 Associated corporations
- 3.3 Specified future tax consequences
- 3.1 Determining the expenditure limit
- 4.0 Refundable investment tax credit
- 5.0 Special situations
- Appendix A – SR&ED investment tax credit rates and SR&ED investment tax credit refund rates for various entities
- Appendix B – References
- Appendix C – Revisions
1.0 Purpose
This policy document deals with determining and utilizing investment tax credits (ITCs) within the context of the Scientific Research and Experimental Development (SR&ED) Program. The purpose of this document is to clarify the position of the Canada Revenue Agency (CRA) regarding investment tax credits when administering the SR&ED legislation under the federal Income Tax Act and the Income Tax Regulations.
1.1 Overview of SR&ED investment tax credit
An ITC may be earned in respect of various investments or expenditures. Unless otherwise noted, any reference to ITC in this policy is a reference to an SR&ED ITC. For more information on the definition of SR&ED, please refer to the Eligibility of Work for SR&ED Investment Tax Credits Policy.
An ITC may be earned in the year by a corporation, individual, member (partner) of a partnership, or beneficiary of a trust, on qualified SR&ED expenditures. Generally, SR&ED ITC is earned at a basic rate of 15% for tax years that end after 2013 or 20% for tax years that end before 2014 (see section 2.2.1). In some cases, a Canadian-controlled private corporation (CCPC) may earn ITC at an enhanced rate of 35% (see section 2.2.2). An ITC may also be earned in the year on a repayment, or deemed repayment, of assistance or contract payment. For a summary of SR&ED ITC rates for various entities, see Appendix A. For more information on qualified SR&ED expenditures, please refer to the Total Qualified SR&ED Expenditures for Investment Tax Credit Purposes Policy and for more information on repayments of assistance or contract payments, please refer to the Assistance and Contract Payments Policy.
An ITC may be applied to reduce Part I tax otherwise payable in the year. In some cases, certain entities including CCPCs may receive all or part of their current-year earned ITC as a cash refund (see section 4.0). An enhanced ITC rate and the ability to get a refund are two advantages of being a CCPC under the SR&ED tax incentive program. ITC at the end of the year may be carried back or carried forward subject to certain rules. For more information on the definition of SR&ED ITC and utilizing it at the end of the year see section 2.1 and section 2.3.
To access the SR&ED ITC incentives, the claimant must complete and file prescribed information in respect of an SR&ED expenditure or a repayment of assistance or contract payment by the SR&ED reporting deadline. For more information on SR&ED filing requirements and the SR&ED reporting deadline, please refer to the SR&ED Filing Requirements Policy.
In a situation where the claimant performing the SR&ED is a partnership, please refer to the SR&ED Claims for Partnerships Policy.
Special situations such as an acquisition of control, amalgamation, or windup of a corporation may affect the availability of a corporation's ITC. These situations are discussed in section 5.0.
There may be recapture of ITC earned on SR&ED expenditures for a property when a claimant sells the property or converts it from SR&ED use to commercial use. For more information on SR&ED ITC recapture rules, please refer to the Recapture of SR&ED Investment Tax Credit Policy.
Legislative References Income Tax Act
Subsection 127(5) Investment tax credit
Subsection 127(8) Investment tax credit of partnership
Subsection 127(9) Definition of "investment tax credit"
Subsections 127(27) to (36) Recapture of investment tax credit
Section 127.1 Refundable investment tax credit
2.0 Legislation
2.1 Definition of SR&ED investment tax credit
The definition of investment tax credit (ITC) in the Income Tax Act determines the amount of ITC that is available to a taxpayer at the end of a tax year. There are additional provisions in the Act that adjust the ITC amount available to a taxpayer at the end of a particular tax year. The following are excerpts from the definition of ITC that apply to SR&ED.
The SR&ED ITC of a claimant at the end of a tax year includes the following:
- ITC earned on SR&ED qualified expenditure pool
The amount included in a claimant's ITC is 15% [note 1] of the excess of a claimant's SR&ED qualified expenditure pool at the end of the tax year, over the total of all its super-allowance benefit amounts for the year in respect of a province. For more information on the SR&ED qualified expenditure pool, please refer to the Total Qualified SR&ED Expenditures for Investment Tax Credit Purposes Policy. For more information on the super-allowance benefit amount, please refer to the Assistance and Contract Payments Policy.
- ITC from a partnership
A partner's reasonable share of SR&ED ITC from a partnership is added to the partner's ITC for the tax year. For more information on determining and allocating a partner's SR&ED ITC in respect of a partnership, please refer to the SR&ED Claims for Partnerships Policy.
- ITC from a trust
A beneficiary's reasonably designated portion of SR&ED ITC from a testamentary trust or inter vivos trust is added to the beneficiary's ITC for the tax year.
- ITC carryforward and carryback
The amount included in a claimant's ITC is 15% [note 1] of the excess of a claimant's SR&ED qualified expenditure pool, over the total of all its super-allowance benefit amounts in respect of a province, determined for the 20 previous tax years or the 3 subsequent tax years. The carry-forward period is generally 20 tax years. The number of years for a carryforward will depend on the rule that applies. For more information on carrying forward of ITC, see section 2.3.3.
- additional ITC for certain Canadian-controlled private corporations
The Act allows some Canadian-controlled private corporations (CCPCs) that meet certain requirements to earn ITCs at the enhanced rate of 35% (15% basic rate + 20% enhancement) [note 1]. Therefore, the amount included in these CCPCs' ITC is an additional 20% [note 1] of the excess of a claimant's SR&ED qualified expenditure pool, over the total of all its super-allowance benefit amounts in respect of a province, determined in the year or for the 20 previous tax years or the 3 subsequent tax years. For more information on the enhanced rate for CCPCs, see section 3.0.
- ITC earned on repayments of assistance or a contract payment
The amount included in a claimant's ITC is the specified percentage of a repayment of assistance or a contract payment in the tax year or for the 20 previous tax years or the 3 subsequent tax years. When the assistance or contract payment received in a previous year reduced an amount that would have earned ITC at the enhanced rate of 35% the extra ITC rate above the basic rate is also included in the amount of ITC in the year of repayment.
The reason for these separate amounts is that the specified percentage and the additional ITC rate for certain CCPCs (where applicable) are provided for in different provisions of the Act. As a result, ITC on a repayment is always determined at the rate the ITC would have been earned in the year the assistance or a contract payment was received.
The SR&ED ITC of a claimant at the end of a tax year excludes the following:
- applied or refunded ITC
ITC amounts applied against Part I tax otherwise payable in the year, in any of the 20 prior tax years or 3 subsequent tax years are excluded. Certain claimants are entitled to a refund of ITC in tax years where no federal Part I tax is otherwise payable. ITC refunds are deemed to be deducted against Part I tax in the year (see section 4.0). In other words, any ITC utilized is removed from the ITC available to the claimant.
- acquisition of control restricts the carry forward or carry back of ITC
The amount by which a corporation may carry forward unused ITCs earned before an acquisition of its control is restricted. The amount by which a corporation may carry back unused ITCs earned after an acquisition of its control is restricted. The extent that they are restricted is discussed further in section 5.1.
- exempt income
No amount shall be considered a claimant's ITC in respect of an SR&ED expenditure made in the course of earning income if any of the claimant's income is exempt from tax.
- ITC not meeting the filing requirement
No amount shall be considered a claimant's ITC in respect of an SR&ED expenditure if the claimant does not file the prescribed form containing the prescribed information in respect of the amount on or before the day that is one year after the claimant's filing-due date for the tax year. For more information on filing requirements, please refer to the SR&ED Filing Requirements Policy.
Note 1
For tax years that end after 2013 the basic ITC rate is 15% and for tax years that end before 2014 the basic ITC rate is 20%. The enhanced ITC rate of 35% has not changed. For tax years that include January 1, 2014, the reduction in the basic ITC rate is pro-rated based on the number of days in the tax year that are after 2013.
Legislative References Income Tax Act
Subsection 127(9) Definition of "investment tax credit", paragraph (a.1)
Subsection 127(9) Definition of "investment tax credit", paragraph (b)
Subsection 127(9) Definition of "investment tax credit", paragraph (c)
Subsection 127(9) Definition of "investment tax credit", paragraph (e)
Subsection 127(9) Definition of "investment tax credit", paragraphs (e.1) and (e.2)
Subsection 127(9) Definition of "investment tax credit", paragraph (f)
Subsection 127(9) Definition of "investment tax credit", paragraph (h)
Subsection 127(9) Definition of "investment tax credit", paragraph (j)
Subsection 127(9) Definition of "investment tax credit", paragraph (k)
Subsection 127(9) Definition of "investment tax credit", paragraph (l)
Subsection 127(9) Definition of "investment tax credit", paragraph (m)
Subsection 127(9) Definition of "specified percentage"
Subsection 127(9.01) Transitional application of investment tax credit definition
Subsection 127(9.02) Transitional application of investment tax credit definition
Subsection 127(10.1) Additions to investment tax credit
Subsection 127(10.7) Further additions to investment tax credit
Subsection 127(10.8) Further additions to investment tax credit
Section 127.1 Refundable investment tax credit
Subsection 127.1(3) Deemed deduction
2.2 Rates for earning an SR&ED investment tax credit
For a summary of SR&ED ITC rates for various entities refer to Appendix A.
2.2.1 Earning the basic investment tax credit rate – 15%
The basic rate of SR&ED ITC is 15% for tax years that end after 2013 and 20% for tax years that end before 2014. For tax years that include January 1, 2014, the reduction in the basic ITC rate is pro-rated based on the number of days in the tax year that are after 2013.
The following types of claimants will earn SR&ED ITC at the basic ITC rate:
- corporations (other than certain CCPCs , see section 2.2.2)
- sole proprietorships (individuals)
- partners of a partnership
- beneficiaries of trusts
2.2.2 Earning the enhanced investment tax credit rate – 35%
CCPCs may earn SR&ED ITC at an enhanced rate of 35%. This enhanced rate may be earned on their qualified SR&ED expenditures up to a maximum threshold of $3 million. For more information on qualified SR&ED expenditures, please refer to the Total Qualified SR&ED Expenditures for Investment Tax Credit Purposes Policy. For more information on determining the enhanced ITC rate and which CCPCs may earn it, see section 3.0.
Legislative References Income Tax Act
Subsection 127(9) Definition of "investment tax credit", paragraph (a.1)
Subsection 127(10.1) Additions to investment tax credit
2.3 Utilizing ITC at the end of the tax year
The definition of ITC determines the claimant's ITC at the end of a tax year (see section 2.1). The Act describes how ITC is utilized but does not impose an order in which they should be claimed. However, the Act does set down a formula for determining the maximum ITC that can be claimed in a tax year. The claimant may apply in the current year, carry back, or carry forward their ITC to reduce their Part I tax otherwise payable according to the rules in sections 2.3.1 to 2.3.3. For certain entities, their ITC at the end of the tax year may be refunded (see section 4.0).
2.3.1 Applying investment tax credits
A taxpayer may apply their ITC available in the year to reduce to nil their Part I tax otherwise payable in the current tax year.
Any SR&ED ITC that is refunded in the tax year is deemed to be ITC applied to reduce Part I tax otherwise payable in the year. As a result, SR&ED ITC that is refunded in the year reduces the ITCs available for carry forward or carry back.
Legislative References Income Tax Act
Subsection 127(5) Investment tax credit
Subsection 127.1(3) Deemed deduction
2.3.2 Carrying back investment tax credits
A taxpayer may carry back their ITC available from the current tax year to any of the 3 preceding tax years to the extent of the lesser of:
- the ITC available in the current year to the extent that it was not deductible to reduce Part I tax otherwise payable in the current year; and
- the amount by which Part I tax otherwise payable in the previous tax year is more than the ITC available in the previous year.
In other words, the ITC available for carry back is any current year ITC in excess of the ITC needed to reduce Part I tax (if any) in the current year to nil. It is not necessary that the current year ITC is applied to reduce current year Part I tax (if any) to nil. However the ITC amount that could reduce the current year Part I tax to nil (deductible) cannot be carried back.
Further, ITC may only be carried back to reduce to nil Part I taxes otherwise payable in the previous year. As previously stated, ITC that is refunded in the tax year is deemed to be applied to reduce Part I tax otherwise payable in the year. Thus, determining the current year ITC available must take any ITC refunded in the current year into account and determining Part I tax otherwise payable in the previous year must take any ITC refunded in the previous year into account as well.
The following example illustrates the carry back rules:
| Tax year | Part I tax otherwise payable in the year | ITC available in the year | Part I tax otherwise payable in excess of ITC available in the year | ITC allowed for carry back |
|---|---|---|---|---|
| Year 1 (previous year) | $10,000 | $6,000 | $4,000 | N/A |
| Year 2 (current year) | $12,000 | $15,000 | Nil | Limited to $3,000 to Year 1 |
In this example the claimant may carry back up to the lesser of:
- $3,000 (the portion of ITC from Year 2 that was not deductible against Part I tax in Year 2)
- $4,000 (Part I tax otherwise payable in year 1 in excess of ITC available in Year 1)
Thus, in this example, the claimant may carry back up to $3,000 from Year 2 to Year 1. The claimant may choose how they utilize the remaining $12,000 of ITC in Year 2 subject to any other applicable rules.
Legislative Reference Income Tax Act
Subsection 127(5) Investment tax credit
2.3.3 Carrying forward and expiry of investment tax credits
An ITC that is not applied, refunded, or carried back may be carried forward and applied to Part I tax otherwise payable in a subsequent year. The number of tax years a claimant may carry forward their ITC will depend on the rule that applies for the tax year in which the ITC was earned. The ITC expires if it is not applied to reduce Part I tax otherwise payable within the applicable number of tax years.
Rule 1
An ITC earned in 2005 and earlier tax years generally may be carried forward 10 tax years. Under this rule, ITC expires after 10 tax years (see rule 3).
Rule 2
ITCs earned in 2006 and 2007 tax years may be carried forward 20 tax years. Under this rule, ITCs expire after 20 tax years.
Rule 3
Legislation applicable to 2008 and later tax years allow the following ITCs to be carried forward 20 tax years:
- ITC earned in 2008 and later tax years; and
- ITC earned in the 10 preceding tax years that ended before 2008 (in other words, the ITC earned in tax years after 1997 that did not expire under Rule 1 before 2008).
If the claimant has no short tax years resulting in only 10 tax years after 1997 and before 2008, the ITC that did not expire before 2008 will be governed by rule 3 and will be afforded a carry forward of 20 tax years. Claimants that have more than 10 tax years after 1997 and before 2008, the ITC that expired after 10 tax years before 2008 (under rule 1) will not be afforded a 20 tax year carry forward under Rule 3.
However, rule 2 provides a 20 tax year carry forward period for ITCs earned in 2006 and 2007 tax years irrespective of the number of short tax years.
Legislative References Income Tax Act
Subsection 127(5) Investment tax credit
Subsection 127(9.01) Transitional application of investment tax credit definition
Subsection 127(9.02) Transitional application of investment tax credit definition
Section 127.1 Refundable investment tax credit
Subsection 127.1(1) Refundable investment tax credit
Subsection 127.1(3) Deemed deduction
3.0 Determining the enhanced rate – 35%
An investment tax credit (ITC) at an enhanced rate of 35% may be earned by Canadian-controlled private corporations (CCPCs) on their qualified SR&ED expenditures incurred in the year up to a maximum threshold of $3 million. This $3 million threshold is called the expenditure limit (see section 3.1). The current year qualified SR&ED expenditures in excess of the expenditure limit for the tax year earn ITC at the basic rate (see section 2.2.1). For more information on qualified SR&ED expenditures, please refer to the Total Qualified SR&ED Expenditures for Investment Tax Credit Purposes Policy.
Legislative References Income Tax Act
Subsection 127(10.1) Additions to investment tax credit
Subsection 127(10.2) Expenditure limit determined
Subsection 127(10.21) Expenditure limits – associated CCPCs
3.1 Determining the expenditure limit
An enhanced ITC rate of 35% may be earned by CCPCs on their qualified SR&ED expenditures up to their expenditure limit. The expenditure limit may be reduced (phased-out) depending on the amount of taxable income and taxable capital employed in Canada of the CCPC for the previous tax year. For CCPCs associated with one or more corporations in a tax year, the expenditure limit may be reduced (phased-out) depending on the amount of taxable income and taxable capital the CCPC and the associated corporations employed in Canada for the previous calendar year (see section 3.1.1). Short tax years will also have an effect on calculating the expenditure limit (see section 3.1.2). A CCPC and its associated corporations (see section 3.2) must allocate the annual expenditure limit for the purposes of calculating their ITCs earned at the enhanced 35% rate (see section 3.1.3). Associated CCPCs that have multiple tax years in the same calendar year will have an effect on calculating the expenditure limit (see section 3.1.4).
The Income Tax Act provides a formula to determine the expenditure limit. For the expenditure limit formula for a corporation that is not associated with any other corporation, please refer to Schedule T2SCH31, Investment Tax Credit – Corporations for the applicable year. For the expenditure limit formula for a corporation that is associated with one or more corporations, please refer to Schedule T2SCH49, Agreement Among Associated Canadian-Controlled Private Corporations to Allocate the Expenditure Limit for the applicable year.
Legislative References Income Tax Act
Subsection 127(10.2) Expenditure limit determined
Subsection 127(10.21) Expenditure limits – associated CCPCs
Subsection 127(10.3) Associated corporations
Subsection 127(10.4) Failure to file agreement
Subsection 127(10.6) Expenditure limit determination in certain cases
3.1.1 Reductions to the expenditure limit
The expenditure limit begins to decrease when the taxable income of the CCPC (with no associated corporations) for the previous tax year is more than $500,000 and becomes nil starting at $800,000. For a CCPC with associated corporations (see section 3.2), the expenditure limit begins to decrease when the total of all taxable incomes of the CCPC and its associated corporations for their last tax years ending in the preceding calendar year is more than $500,000 and becomes nil starting at $800,000.
The taxable income for the previous tax year or for the last tax year in the preceding calendar year is calculated before taking into consideration the specified future tax consequences (see section 3.3) for that previous year.
The expenditure limit also begins to decrease when the taxable capital employed in Canada of the CCPC (with no associated corporations) for the previous tax year reaches $10 million and becomes nil starting at $50 million. For CCPCs with associated corporations, the expenditure limit also begins to decrease when the taxable capital employed in Canada of the CCPC and its associated corporations for their last tax years ending in the preceding calendar year reaches $10 million and becomes nil starting at $50 million.
Taxable capital employed in Canada by the corporation has the meaning provided in the Act. For more information on taxable capital, please refer to Interpretation Bulletin IT-532, Part I.3 – Tax on Large Corporations.
These thresholds apply to years after December 31, 2009. For thresholds before 2010, please see the formula in Schedule T2SCH31, Investment Tax Credit – Corporations for the applicable year.
Legislative References Income Tax Act
Subsection 127(10.2) Expenditure limit determined
Subsection 127(10.21) Expenditure limits – associated CCPCs
3.1.2 Effect of short tax years on the expenditure limit
When calculating the expenditure limit, if the previous tax year of the CCPC is less than 51 weeks, the taxable incomes must be grossed-up for those tax years by the ratio that 365 is to the number of days in those tax years.
Where the current tax year of a CCPC is less than 51 weeks, the expenditure limit for the tax year-end must be prorated based on the number of days in the tax year divided by 365.
Legislative Reference Income Tax Act
Subsection 127(10.6) Expenditure limit determination in certain cases
3.1.3 Allocation of the expenditure limit for associated Canadian-controlled private corporations
A CCPC and its associated corporations (see section 3.2) must allocate the annual expenditure limit for the purposes of calculating their ITCs earned at the enhanced 35% rate. The portion of the CCPC's expenditure limit that is not allocated to itself may be allocated to an associated corporation to the extent of the associated corporation's expenditure limit determined under the Act (see example below). Thus, the expenditure limit allocated to each particular corporation cannot exceed the expenditure limit determined for the associated group for the applicable tax year.
The expenditure limit otherwise determined is nil in a tax year that a corporation is associated with another corporation unless all of the CCPCs that are associated in the year file an agreement in prescribed form allocating the expenditure limit among themselves.
The expenditure limit for the applicable tax year may be allocated among the associated corporations by filing Schedule T2SCH49, Agreement Among Associated Canadian-Controlled Private Corporations to Allocate the Expenditure Limit. The Act allows the CRA to allocate the expenditure limit among the group of associated CCPCs if the group does not file the agreement allocating the expenditure limit within 30 days of when the CRA requested such information. For more information about the filing requirements, please refer to the SR&ED Filing Requirements Policy.
Example
Corporations X, Y, and Z are associated and there is no reduction to the expenditure limits due to the previous year's taxable income or taxable capital employed in Canada.
- The tax year-end of corporation X is January 31, 2010, which is a short taxation year. Its individual expenditure limit is $2,000,000.
- The tax year-end of corporation Y is April 30, 2010 and its individual expenditure limit is $3,000,000.
- The tax year-end of corporation Z is December 31, 2010 and its individual expenditure limit is $3,000,000.
If corporation Z allocates $500,000 to itself, the remaining $2,500,000 may be allocated to corporations X and Y. However, the allocation to corporation X cannot be more than its individual expenditure limit of $2,000,000.
Legislative References Income Tax Act
Subsection 127(10.3) Associated corporations
Subsection 127(10.4) Failure to file agreement
3.1.4 Determining the expenditure limit for associated corporations with multiple tax years in a calendar year
Special rules apply for determining the expenditure limit if:
- a CCPC has more than one tax year ending in a calendar year; and
- that CCPC is associated in two or more of those tax years with another CCPC, which has a tax year ending in the same calendar year.
In the foregoing situation, the expenditure limit of the first CCPC for each tax year ending in the calendar year is equal to the expenditure limit for the first tax year. However, if a tax year is less than 51 weeks, the limit is prorated based on the number of days in the year.
Example
P and Q are CCPCs. The expenditure limit for a CCPC and its associated corporations is $3,000,000 (see section 3.1)
P has a year-end of June 30. Q has a year-end of December 31. In 2010, P changes its year-end to December 31. As a result, it has two tax years in 2010: the 12-month period ending June 30, and the 6-month period ending December 31. From then on, the year-end of P is December 31.
| Corporation | Tax year-end | Expenditure limit |
|---|---|---|
| P | June 30, 2009 | $1,500,000 |
| Q | December 31, 2009 | $1,500,000 |
| Corporation | Tax year-end | Expenditure limit |
|---|---|---|
| P | June 30, 2010 | $1,500,000 |
| P | December 31, 2010 | $ 756,164* |
| Q | December 31, 2010 | $1,500,000 |
| Corporation | Tax year-end | Expenditure limit |
|---|---|---|
| P | December 31, 2011 | $1,500,000 |
| Q | December 31, 2011 | $1,500,000 |
The two corporations have been allocated the expenditure limit equally ($1,500,000 to each corporation) for each year. The allocation of the expenditure limit for 2010 is between P for its June 30, 2010 tax year-end and Q for its December 31, 2010 tax year-end. The expenditure limit for P's December 31, 2010 tax year-end is determined as follows:
*Where there are multiple tax years in a calendar year, the Act requires that the expenditure limit for P for the tax year ending December 31, 2010 be equal to its expenditure limit for the tax year ending June 30, 2010 (in this instance, $1,500,000), subject to any proration for a short tax year. Since the tax year ending on December 31, 2010, is less than 51 weeks, the Act requires that the expenditure limit be prorated for the number of days in the year (see section 3.1.2).
P's expenditure limit for tax year ended December 31, 2010:
$1,500,000 x [184 days (from July 1 to December 31) ÷ 365 days] = $756,164
Legislative References Income Tax Act
Subsection 125(7) Definition of "Canadian-controlled private corporation"
Subsection 127(10.2) Expenditure limit determined
Subsection 127(10.21) Expenditure limits – associated CCPCs
Subsection 127(10.3) Associated corporations
Subsection 127(10.4) Failure to file agreement
Subsection 127(10.6) Expenditure limit determination in certain cases
Section 181.2 Taxable capital employed in Canada
Section 181.3 Taxable capital employed in Canada of financial institution
Section 181.4 Taxable capital employed in Canada of non-resident
3.2 Associated corporations
Determining whether a corporation is associated with another relies on determining the control of the corporation that is exercised directly or indirectly in any manner whatever. For more information on the concept of control, please refer to Interpretation Bulletin IT-64R4 (Consolidated), Corporations: Association and Control.
For more information on situations where corporations are associated, please see "When is a corporation associated?" in the Guide T4012, T2 Corporation – Income Tax Guide.
Corporations deemed to be associated
If two otherwise unassociated corporations are associated with the same third corporation, the Act deems the two corporations to be associated with each other. There are exceptions but they only apply for the purposes of the small business deduction.
Two or more corporations are deemed associated with each other if one of the main reasons for the separate existence of those corporations is to reduce the amount of income tax otherwise payable or to increase the amount of refundable ITCs available (see section 4.0).
Corporations deemed not to be associated
As a result of the group of persons definition, CCPCs may be considered to be associated when the same group of otherwise unconnected investors, such as venture capital investors, have invested in each of them. To ensure the receipt of SR&ED tax incentives by small businesses is not hindered in these situations, the Act provides relieving provisions. The provisions deem that corporations will not be associated for the purposes of calculating the expenditure limit and refundable ITC, if the only reason one corporation is associated with another is because two or more investors own shares in each corporation. These relieving provisions are subject to the following conditions:
- the corporations must not be otherwise associated under the Act;
- there is at least one shareholder of one of the corporations who is not a shareholder of the other corporation; and
- the existence of one or more shareholders of one of the corporations who is not a shareholder of the other corporation, is not for the purpose of satisfying these relieving provisions.
This relief for the particular corporations is for SR&ED ITC purposes only and does not extend to shareholding structures intended to multiply the expenditure limit of corporations.
Legislative References Income Tax Act
Subsection 127(10.2) Expenditure limit determined
Subsection 127(10.21) Expenditure limits – associated CCPCs
Subsection 127(10.22) Deemed non-association of corporations
Subsection 127(10.23) Application of subsection 127(10.22)
Subsection 127.1(2.2) Refundable investment tax credit – associated CCPCs
Subsection 127.1(2.3) Application of subsection 127.1(2.2)
Subsection 256(1) Associated corporations
Paragraph 256(1.2)(a) Extended definition of "group of persons"
Subsection 256(2) Corporations associated through a third corporation
Subsection 256(2.1) Anti-avoidance
3.3 Specified future tax consequences
A specified future tax consequence is defined in the Act. The expression means the consequence of a deduction, exclusion, reduction, or adjustment under different provisions of the Act that are specified in the definition itself. The consequence that is relevant for the purposes of calculating the expenditure limit and qualifying corporation (see section 4.2) is an amount deducted in the current year in respect of a loss in a subsequent tax year (in other words, a loss carryback).
The consequence of a loss carryback to a particular year is that the taxable income for the year is reduced. As discussed in section 3.1.1, the expenditure limit may be reduced based on the taxable income, of the CCPC and its associated corporations (if any), for the previous tax year. The amount of the expenditure limit affects the rate with which ITC is earned. Without the definition of specified future tax consequence in the Act, a claimant would have been able to apply a loss from a later year to the year before the ITC was earned, increasing the amount of the expenditure limit, and trigger a change in the rate of ITC (and a refund of ITC, see section 4.0) for the tax year. Thus, the definition of specified future tax consequence in the Act prevents a loss being used to change the rate of ITC. Carrying back a loss has no effect on the ITC rate of the claimant.
Legislative References Income Tax Act
Section 111 Losses deductible
Paragraph 161(7)(a) Effect of carryback of loss, etc.
Subsection 248(1) Definition of "specified future tax consequences"
4.0 Refundable investment tax credit
The investment tax credit (ITC) of certain claimants (see section 4.1) that is not applied in the year to Part I tax, or carried back to a previous year and applied to Part I tax in the previous year, may be refundable. In this context, the term refundable goes beyond a reimbursement of Part I tax already paid and refers to the credit that is reimbursed to the claimant.
Any SR&ED ITC that is refunded in the year is deemed to be ITC applied to reduce Part I tax otherwise payable in the year. As a result, SR&ED ITC that is refunded in the year reduces the ITCs available to carry forward or carry back.
Generally, an SR&ED ITC refund may only be claimed in the year in respect of a property that is purchased or an expenditure incurred that qualifies for an SR&ED ITC. Some circumstances (for example, the available-for-use rules related to capital property before 2014, or the rules related to unpaid current expenditures) may deem the expenditure to have been made in a future year. An SR&ED ITC refund cannot be claimed in respect of repayments of assistance or a contract payment.
For more information on available for use rules, please refer to the SR&ED Capital Expenditures Policy. For more information on unpaid salaries or wages or unpaid amounts, please refer to the SR&ED Salary or Wages Policy and the Total Qualified SR&ED Expenditures for Investment Tax Credit Purposes Policy, respectively.
Legislative Reference Income Tax Act
Section 127.1 Refundable investment tax credit
Subsection 127.1(2) Definition of "refundable investment tax credit"
Subsection 127.1(2.01) Additions to refundable investment tax credit
Subsection 149(1) Miscellaneous exemptions
4.1 Refundable investment tax credit for various entities
According to the definition of refundable ITC in the Income Tax Act and other supporting provisions, the following types of claimants can earn a refundable ITC. For the definition of qualifying corporation see section 4.2 and for the definition of excluded corporation see section 4.3. The definition of Canadian-controlled private corporation (CCPC) is contained in the glossary. The amount of refundable ITC that can be earned is described below:
1) For a CCPC that is a qualifying corporation, other than an excluded corporation, the refundable ITC is:
- 100% of the unclaimed balance of the ITC earned in the year at the enhanced ITC rate of 35% for its qualified SR&ED expenditures of a current nature and its prescribed proxy amount (PPA);
- For tax years that end before 2014, 40% of the unclaimed balance of the ITC earned in the year at the enhanced ITC rate of 35% for its qualified SR&ED expenditures of a capital nature; and
- 40% of the unclaimed balance of the ITC earned in the year at the basic ITC rate of 15%, for tax years that end after 2013, and 20% for tax years that end before 2014, for its qualified SR&ED expenditures (see section 2.2.1).
2) For a CCPC, other than one that is a qualifying corporation or an excluded corporation, the refundable ITC is:
- 100% of the unclaimed balance of the ITC earned in the year at the enhanced ITC rate of 35% for qualified SR&ED expenditures of a current nature and its PPA; and
- For tax years that end before 2014, 40% of the unclaimed balance of the ITC earned in the year at the enhanced ITC rate of 35% for qualified SR&ED expenditures of a capital nature.
An ITC earned at the basic ITC rate for a CCPC, other than a qualifying corporation or an excluded corporation, is not refundable.
3) For a CCPC that is a qualifying corporation, that is an excluded corporation, the refundable ITC is 40% of the unclaimed balance of the ITC earned in the current year for qualified SR&ED expenditures.
4) Generally, for an individual (other than a trust), the refundable ITC is 40% of the unclaimed balance of ITC earned in the current year for qualified SR&ED expenditures.
5) Generally for a trust, each beneficiary of which is either a qualifying corporation or an individual (other than a trust), the refundable ITC is 40% of the unclaimed balance of ITC earned in the current year for qualified SR&ED expenditures.
For more information on refundable ITC for partners of a partnership, please refer to the SR&ED Claims for Partnerships Policy. For more information on qualified SR&ED expenditures, please refer to the Total Qualified SR&ED Expenditures for Investment Tax Credit Purposes Policy.
Though the expenditure limit (see section 3.1) and the calculation of earned ITCs at the enhanced rate (see section 3.0) are separate from calculating refundable ITC, for tax years that end before 2014, the expenditure limit is first applied to current expenditures to maximize the refundable amount (current expenditures attract a higher refund rate). See Part 11 of Schedule T2SCH31, Investment Tax Credit – Corporations.
SR&ED claims made by large corporations that earn an ITC at the basic rate (see section 2.2.1 ) are for non-refundable ITC. Any corporation that is not a CCPC also falls into this category.
The table in Appendix A contains the refundable ITC rates for various entities.
Legislative References Income Tax Act
Section 127.1 Refundable investment tax credit
Subsection 127.1(2) Definition of "refundable investment tax credit"
Subsection 127.1(2.01) Additions to refundable investment tax credit
Subsection 149(1) Miscellaneous exemptions
4.2 Qualifying corporation
Qualifying corporation is defined in the Act and means:
- a corporation that is a CCPC in a particular tax year, with taxable income in the previous tax year that is not more than the corporation's qualifying income limit (see section 4.2.1) for the particular tax year, or
- a corporation that is a CCPC in a particular tax year and is associated (see section 3.2) with one or more corporations, the total of the taxable incomes of the corporation and the associated corporations for their last tax year ending in the preceding calendar year that is not more than the corporation’s qualifying income limit for the particular tax year.
The taxable income in the previous tax year or in the last tax year ending in the preceding calendar year is calculated before taking into consideration the specified future tax consequences (see section 3.3) for that previous year.
Where a CCPC's qualifying income limit is reduced to zero because the CCPC's taxable capital is $50 million or greater in the immediately preceding year (see section 4.2.1), the CCPC is not a qualifying corporation and would not be entitled to any refundable ITC.
The definition of qualifying corporation was amended and no longer relies upon the corporation's business limit as determined under the Act. The reference is now to the corporation's qualifying income limit. The amended definition of qualifying corporation applies to tax years that end after February 25, 2008. For the definition of qualifying corporation before February 26, 2008, please refer to Schedule T2SCH31, Investment Tax Credit – Corporations for the applicable year. For more information on business limit before February 26, 2008, see Line 410 of the T4012, T2 Corporation - Income Tax Guide for the applicable year.
Legislative Reference Income Tax Act
Subsection 127.1(2) Definition of "qualifying corporation"
4.2.1 Qualifying income limit
For the 2010 and later tax years, the qualifying income limit of a corporation for a particular tax year is the amount determined in the Act by the formula:
$500,000 x [($40,000,000 – A) ÷ $40,000,000]
In this formula A is:
- nil if the taxable capital amount* is less than or equal to $10 million; or
- the lesser of $40 million and the amount by which the taxable capital amount exceeds $10 million, in any other case.
*The taxable capital amount is the total of the corporation's taxable capital employed in Canada for its immediately preceding tax year and the taxable capital employed in Canada of all associated corporations (if applicable) for the last tax year ending in the preceding calendar year that ended before the end of the particular tax year of the corporation. Taxable capital employed in Canada by the corporation has the meaning provided in the Act. For more information on taxable capital, please refer to Interpretation Bulletin IT-532, Part I.3 – Tax on Large Corporations.
For the 2009 and previous tax years, the reference to $500,000 in the formula for the definition of qualifying income limit is replaced with $400,000. If the tax year begins before 2010, but ends after 2009, the increase to the qualifying income limit will be prorated based on the number of days in the tax year that are after 2009.
The definition of qualifying income limit applies to tax years that end after February 25, 2008, to support the amended definition of qualifying corporation (see section 4.2). For tax years ending before February 26, 2008 the definition of qualifying corporation relied on the corporation's business limit as determined under the Act. For more information on business limit before February 26, 2008, see Line 410 of the T4012, T2 Corporation – Income Tax Guide for the applicable year.
For tax years that straddle February 26, 2008, the increase of the qualifying income limit over the business limit is prorated based on the number of days in the tax year that are after February 25, 2008.
Legislative References Income Tax Act
Subsection 127.1(2) Definition of "qualifying income limit"
Section 181.2 Taxable capital employed in Canada
Section 181.3 Taxable capital employed in Canada of financial institution
Section 181.4 Taxable capital employed in Canada of non-resident
4.3 Excluded corporation
An excluded corporation is defined in the Act. An excluded corporation is a corporation that is, at any time in the year, either controlled by (directly or indirectly, in any manner whatever), or is related to:
- one or more persons exempt from tax under section 149;
- Her Majesty in right of a province, a Canadian municipality or any other public authority; or
- any combination of the above persons.
For more information on the concept of control, please refer to Interpretation Bulletin IT-64R4 (Consolidated), Corporations: Association and Control. For more information on related persons, please refer to Income Tax Folio S1-F5-C1, Related persons and dealing at arm's length.
Legislative References Income Tax Act
Subsection 127.1(2) Definition of "excluded corporation"
Subsection 149(1) Miscellaneous exemptions
4.4 Assignment of a refundable SR&ED investment tax credit
The Income Tax Act states that a corporation may assign an amount payable to it under the Act. However, the Act also states that such assignments are not binding on the CRA. Where an assignment has been made, the CRA will continue to issue the refund cheque in the name of the claimant. Under no circumstances will CRA refund cheques be made payable to an assignee.
C/o address option
If the CRA receives a written request, a refund cheque can be sent to a "c/o address" (an address other than the regular mailing address of the claimant). A claimant who wants this service should forward such requests with their T2 return, or directly to their tax centre. The claimant should also clearly state that only this refund cheque is to be sent to the c/o address. Otherwise, the CRA will send all refunds, notices of assessment and any other correspondence to the c/o address.
Legislative References Income Tax Act
Subsection 220(6) Assignment by corporation
Subsection 220(7) Effect of assignment
5.0 Special situations
5.1 Acquisition of control – effect on investment tax credits
If control of a corporation has been acquired by a person or group of persons resulting in a loss restriction event, the availability of the corporation's investment tax credit (ITC) is restricted. When there is an acquisition of control of a corporation there is a deemed year-end.
ITCs earned by a business of a corporation before an acquisition of control may be carried forward to a tax year ending after control was acquired if:
- the ITC is applied to Part I tax on the income for the year where the income is from the same business carried on by the corporation before the acquisition of control; or
- the ITC is applied to Part I tax on the income from any other business of the corporation where substantially all the income of which is from activities (for example, the sale, leasing, rental, or development of properties or the rendering of services) similar to those of the particular business carried on by the corporation before the acquisition of control.
ITCs earned by a business of a corporation after an acquisition of control may be carried back to a tax year ending before control was acquired if:
- the ITC is applied to Part I tax on the income for the year where the income is from the same business carried on by the corporation; or
- the ITC is applied to Part I tax on the income from any other business of the corporation where substantially all the income of which is from activities (for example, the sale, leasing, rental, or development of properties or the rendering of services) similar to those of the business carried on by the corporation.
These rules also apply to trusts starting March 21, 2013.
Legislative References Income Tax Act
Subsection 127(9) Definition of "investment tax credit", paragraph (j)
Subsection 127(9) Definition of "investment tax credit", paragraph (k)
Subsection 127(9.1) Loss restriction event before end of year
Subsection 127(9.2) Loss restriction event after end of year
Subsection 249(4) Year end on acquisition of control
Subsection 251.2(2) Loss restriction event
5.2 Amalgamation and windup – continuation of predecessor corporations
Where there has been an amalgamation of two or more corporations, as defined in the Income Tax Act, for the purposes of calculating the ITC of the newly amalgamated corporation at the end of any particular tax year, the corporation is deemed to be the same corporation as, and a continuation of, any predecessor corporation. This provision allows the amalgamated corporation to claim any carryforward of ITC of the predecessor corporations.
Similarly, when there has been a windup of a taxable Canadian corporation, the Act provides that the parent corporation is deemed, for SR&ED purposes, to be the same corporation as, and a continuation of, its subsidiary. These deeming provisions only apply for the purpose of calculating the parent's ITC at the end of any tax year ending after the subsidiary was wound up. Where a subsidiary is wound up into its parent, the parent cannot claim the subsidiary's ITC carried forward against the Part I tax otherwise payable by the parent for a tax year preceding the year in which the subsidiary was wound up.
Such claims are subject to the time limits described in the definition of ITC (see section 2.1).
For detailed information on amalgamations and windups, please refer to Income Tax Folio, S4-F7-C1: Amalgamations of Canadian Corporations and Interpretation Bulletin IT-126R2, Meaning of "Winding-up".
Legislative References Income Tax Act
Section 87 Amalgamations
Paragraph 87(2)(l) Scientific research and experimental development
Paragraph 87(2)(qq) Continuation of a corporation
Section 88 Winding-up
Paragraph 88(1)(e.2) Winding-up – application of amalgamation provisions
Paragraph 88(1)(e.3) Winding-up – investment tax credit
Appendix A – SR&ED investment tax credit rates and SR&ED investment tax credit refund rates for various entities
For tax years that end after 2013:
|
Type of claimant |
Nature of expenditure (a) |
Rates on SR&ED expenditures up to expenditure limit (b, and c) |
Refund rate |
Rates on SR&ED expenditures over expenditure limit (b, and c) |
Refund rate |
|---|---|---|---|---|---|
|
Qualifying corporations (see section 4.2) other than excluded corporations |
Current |
35% |
100% |
15% |
40% |
|
Excluded corporations (see section 4.3) |
Current |
35% |
40% |
15% |
40% |
|
Canadian-controlled private corporations (CCPCs) other than qualifying or excluded corporations |
Current |
35% |
100% |
15% (d) |
0% |
|
All other corporations not included above |
Current |
15% |
0% |
15% |
0% |
|
Individuals, certain trusts and unincorporated businesses |
Current |
15% |
40% |
15% |
40% |
|
Partner of a partnership |
Current |
15% |
40% (e) |
15% |
40% (e) |
For tax years that end before 2014:
|
Type of claimant |
Nature of expenditure |
Rates on SR&ED expenditures up to expenditure limit (b) |
Refund rate |
Rates on SR&ED expenditures over expenditure limit (b) |
Refund rate |
|---|---|---|---|---|---|
|
Qualifying corporations (see section 4.2) other than excluded corporations |
Current |
35% |
100% |
20% |
40% |
|
Qualifying corporations (see section 4.2) other than excluded corporations |
Capital |
35% |
40% |
20% |
40% |
|
Excluded corporations (see section 4.3) |
Current |
35% |
40% |
20% |
40% |
|
Excluded corporations (see section 4.3) |
Capital |
35% |
40% |
20% |
40% |
|
Canadian-controlled private corporations (CCPCs) other than qualifying or excluded corporations |
Current |
35% |
100% |
20% (d) |
0% |
|
Canadian-controlled private corporations (CCPCs) other than qualifying or excluded corporations |
Capital |
35% |
40% |
20% (d) |
0% |
|
All other corporations not included above |
Current |
20% |
0% |
20% |
0% |
|
All other corporations not included above |
Capital |
20% |
0% |
20% |
0% |
|
Individuals, certain trusts and unincorporated businesses |
Current |
20% |
40% |
20% |
40% |
|
Individuals, certain trusts and unincorporated businesses |
Capital |
20% |
40% |
20% |
40% |
|
Partner of a partnership |
Current |
20% |
40% (e) |
20% |
40% (e) |
|
Partner of a partnership |
Capital |
20% |
40% (e) |
20% |
40% (e) |
Notes
a) Expenditures of a capital nature or expenditures for the right to use capital property incurred after 2013 no longer earn SR&ED ITCs.
b) Expenditure limit is a maximum threshold of $3 million per year. See sections 3.0 – 3.3.
c) For tax years that include January 1, 2014, the reduction in the basic ITC rate (from 20% to 15%) is pro-rated based on the number of days in the tax year that are after 2013.
d) It is possible that all of a CCPC's (other than a qualifying or excluded corporation) investment tax credits (ITCs) will be earned at the basic rate.
e) Only partners that are qualifying corporations, individuals, and certain trusts may be refunded their allocated ITC at the rate of 40%. The ITC allocated to a member of a partnership that is a corporation, other than a qualifying corporation, cannot be refunded. For more information, please refer to the SR&ED Claims for Partnerships Policy.
Legislative References Income Tax Act
Subsection 127(9) Definition of "investment tax credit", paragraph (a.1)
Subsection 127(10.1) Additions to investment tax credit
Section 127.1 Refundable investment tax credit
Subsection 127.1(2) Definition of "excluded corporation"
Subsection 127.1(2) Definition of "qualifying corporation"
Subsection 127.1(2) Definition of "refundable investment tax credit"
Subsection 127.1(2.01) Additions to refundable investment tax credit
Appendix B – References
B.1 Legislative references
| Income Tax Act | Description |
|---|---|
| Section 87 | Amalgamations |
| Paragraph 87(2)(l) | Scientific research and experimental development |
| Paragraph 87(2)(qq) | Continuation of a corporation |
| Section 88 | Winding-up |
| Paragraph 88(1)(e.2) | Winding-up – application of amalgamation provisions |
| Paragraph 88(1)(e.3) | Winding-up – investment tax credit |
| Section 111 | Losses deductible |
| Subsection 125(7) | Definition of "Canadian-controlled private corporation" |
| Subsection 127(5) | Investment tax credit |
| Subsection 127(8) | Investment tax credit of partnership |
| Subsection 127(9) | Definition of "investment tax credit" |
| Subsection 127(9) | Definition of "investment tax credit", paragraph (a.1) |
| Subsection 127(9) | Definition of "investment tax credit", paragraph (b) |
| Subsection 127(9) | Definition of "investment tax credit", paragraph (c) |
| Subsection 127(9) | Definition of "investment tax credit", paragraph (e) |
| Subsection 127(9) | Definition of "investment tax credit", paragraphs (e.1) and (e.2) |
| Subsection 127(9) | Definition of "investment tax credit", paragraph (f) |
| Subsection 127(9) | Definition of "investment tax credit", paragraph (h) |
| Subsection 127(9) | Definition of "investment tax credit", paragraph (j) |
| Subsection 127(9) | Definition of "investment tax credit", paragraph (k) |
| Subsection 127(9) | Definition of "investment tax credit", paragraph (l) |
| Subsection 127(9) | Definition of "investment tax credit", paragraph (m) |
| Subsection 127(9) | Definition of "specified percentage" |
| Subsection 127(9.01) | Transitional application of investment tax credit definition |
| Subsection 127(9.02) | Transitional application of investment tax credit definition |
| Subsection 127(9.1) | Loss restriction event before end of year |
| Subsection 127(9.2) | Loss restriction event after end of year |
| Subsection 127(10.1) | Additions to investment tax credit |
| Subsection 127(10.2) | Expenditure limit determined |
| Subsection 127(10.21) | Expenditure limits – associated CCPCs |
| Subsection 127(10.22) | Deemed non-association of corporations |
| Subsection 127(10.23) | Application of subsection 127(10.22) |
| Subsection 127(10.3) | Associated corporations |
| Subsection 127(10.4) | Failure to file agreement |
| Subsection 127(10.6) | Expenditure limit determination in certain cases |
| Subsection 127(10.7) | Further additions to investment tax credit |
| Subsection 127(10.8) | Further additions to investment tax credit |
| Subsections 127(27) to (36) | Recapture of investment tax credit |
| Section 127.1 | Refundable investment tax credit |
| Subsection 127.1(1) | Refundable investment tax credit |
| Subsection 127.1(2) | Definition of "excluded corporation" |
| Subsection 127.1(2) | Definition of "qualifying corporation" |
| Subsection 127.1(2) | Definition of "qualifying income limit" |
| Subsection 127.1(2) | Definition of "refundable investment tax credit" |
| Subsection 127.1(2.01) | Additions to refundable investment tax credit |
| Subsection 127.1(2.2) | Refundable investment tax credit – associated CCPCs |
| Subsection 127.1(2.3) | Application of subsection 127.1(2.2) |
| Subsection 127.1(3) | Deemed deduction |
| Subsection 149(1) | Miscellaneous exemptions |
| Paragraph 161(7)(a) | Effect of carryback of loss, etc. |
| Section 181.2 | Taxable capital employed in Canada |
| Section 181.3 | Taxable capital employed in Canada of financial institution |
| Section 181.4 | Taxable capital employed in Canada of non-resident |
| Subsection 220(6) | Assignment by corporation |
| Subsection 220(7) | Effect of assignment |
| Subsection 248(1) | Definition of "specified future tax consequences" |
| Subsection 249(4) | Year end on acquisition of control |
| Subsection 251.2(2) | Loss restriction event |
| Subsection 256(1) | Associated corporations |
| Paragraph 256(1.2)(a) | Extended definition of "group of persons" |
| Subsection 256(2) | Corporations associated through a third corporation |
| Subsection 256(2.1) | Anti-avoidance |
| Income Tax Regulations | Description |
|---|---|
| Section 4800 | Status of corporations and trusts |
| Section 6700 | Prescribed venture capital corporation |
| Section 7100 | Prescribed Federal Crown Corporations |
Appendix C – Revisions
C.1 Explanation of changes
The following are the explanation of changes to the SR&ED Investment Tax Credit Policy as part of the revision of December 18, 2014:
Section 1.0 has been revised to delete the first sentence of the previous policy which mentioned that this policy document was a consolidation of the CRA publications.
Section 1.1 has been revised to reflect the legislative changes resulting from the 2012 federal budget measures, specifically the change to the basic ITC rate.
Section 2.1 has been revised to reflect the legislative changes resulting from the 2012 federal budget measures, specifically the change to the basic ITC rate and the change to the amount of enhancement to maintain the enhanced rate at 35%.
Section 2.2.1 has been revised to reflect the legislative changes resulting from the 2012 federal budget measures, specifically the change to the basic ITC rate and the proration of the rate for tax years that straddle January 1, 2014.
Section 4.1 has been revised to reflect the legislative changes resulting from the 2012 federal budget measures, specifically relating to expenditures of a capital nature incurred after 2013. These expenditures no longer qualify as an SR&ED expenditures and no longer earn SR&ED ITCs.
Section 5.1 has been revised to refer to a loss restriction event when there is an acquisition of control involving corporations or trusts.
Appendix A has been revised by adding an additional table to reflect the legislative changes resulting from the 2012 federal budget measures, specifically the change to the basic ITC rate and that expenditures of a capital nature or expenditures for the right to use capital property incurred after 2013 no longer earn SR&ED ITCs.
Appendix B.2 "CRA publications" has been removed.
Other minor formatting and editing corrections were made throughout the document.
- Date modified:
- 2014-12-18