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.
Dear Sirs:
This is in reply to your letter dated May 1, 1990, in which you asked for our opinion with respect to the definition of "qualified expenditure" found in subsection 127(9) and our confirmation that there is no need to apply the "all and substantially all" test to the portion of an employee's salary or wages that directly relate to the prosecution of scientific research and experimental development ("SR&ED").
Our Comments
We cannot provide comments on the actual situation described, but we can provide the following general comments.
With regard to your first query, we agree that a reimbursement from a U.S. parent that is not subject to Canadian tax does not usually reduce a qualified expenditure for the purposes of the investment tax credit of a Canadian subsidiary. However, it is a question of fact which corporation undertakes the SR&ED.
With regard to your second query, we confirm that the "all or substantially all" test would not apply to the portion of an employee's salary or wages allocated to the prosecution of SR&ED provided that the allocation reflects the actual time spent on the prosecution of the SR&ED.
These comments represent our opinion of the law as it applies generally. As indicated in paragraph 24 of the Information Circular IC 70-6R [Information Circular 70-6R], this opinion is not a ruling and accordingly, it is not binding on Revenue Canada, Taxation.
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© Her Majesty the Queen in Right of Canada, 1990
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© Sa Majesté la Reine du Chef du Canada, 1990
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