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SR&ED Program benefits
R&D Expenditure Pool
Eligible R&D expenditures, both current and capital, are aggregated in a pool each year and may be deductible in whole or in part from income for a given taxation year. Any amount not deducted in the current year may be carried forward indefinitely. One important distinction to understand is that although these expenditures are deductible from income, not all expenditures give entitlement to tax credits. The following table summarizes deductible expenditures and shows those which give entitlement to Federal Investment Tax Credits (ITCs) and Québec R&D Wage Tax Credits (WTCs).
Expenditure Deductible from Income? Eligible Federal ITCs? Eligible Québec WTCs?
SR&ED salaries Yes Yes Yes
Subcontracting Yes Yes Yes, but only 50% of subcontracting in Québec
Materials consumed or transformed in R&D Yes Yes No
Lease cost of equipment used in R&D Yes Yes No
Payments made to an entity such as a university, college, research institute or tax-exempt organization resident in Canada, where the taxpayer has the right to use the research results Yes Yes No, but give entitlement to other tax credits
Capital expenditures for R&D Yes Yes No