(As originally published on LinkedIn, 6 December 2018)
Navigating the growing Canadian business credits and incentives landscape
By: Elizabeth Pringle, Executive Director, Business Tax Advisory at EY Canada
Planning on expanding your business? Hiring more people? Developing new products or processes? These are all great things that will benefit your business in the long run. However, the challenge is often sourcing the funds in the short term. Thousands of Canadian companies are receiving credits and incentives to help them do just that.
The incentives landscape is complicated and constantly changing. In 2017, companies in Canada received over $875 million in direct government incentives. So far in 2018, Canadian companies have received nearly $2 billion (Source: IncentivesMonitor, a service from WAVTEQ 2018. All Rights Reserved).
Despite this increase in direct funding, the Scientific Research and Experimental Development (SR&ED) tax credit program, which is a longstanding source of indirect government funding, remains of critical importance to Canadian businesses, especially since it’s an entitlement, unlike the programs referenced above. The Canada Revenue Agency’s (CRA) 2016-17 report to parliament noted that $2.7 billion in Investment Tax Credits (ITCs) were awarded to Canadian companies that year. CRA representatives have indicated that that number was $2.9 billion for fiscal year 2017/2018 and are projecting $3 billion next year.
Whether short term discretionary programs or longstanding tax credits, clearly, the money is there to help your business – but accessing it can be a challenge. New programs are announced frequently, but they can all work very differently, with varying deadlines, limits, approval processes and eligibility criteria. This complicated landscape can be perplexing. However, given what opportunities these programs can provide, they can’t be ignored if you want to stay competitive.
Effective navigation of this landscape is the key to success. Leaders need to learn what’s out there, the eligibility criteria and the application process in order to get the greatest return on investment. Most programs have contacts who can provide insight and details on their eligibility criteria. The federal government even has an online “concierge” service aimed at helping you match activities to various programs. Regardless of how you get the information, a thoughtful approach is best.
Here are the key steps to developing an incentives strategy:
- Develop or review your business operations and projects, taking into account your company’s goals, the region(s) of operation and the sources of financing.
- Research available programs to identify the ones that best align with your activities and plans.
- Learn the eligibility criteria and identify application windows. Be aware of any limits that may exist regarding funding from multiple sources, other programs, etc.
- Position your project effectively in applications to emphasize how your initiative aligns with the key eligibility criteria.
- Establish internal processes to track your project progress once awarded funding in order to make compliance reporting as easy as possible.
A successful incentives strategy will put you on track to get the funds you need to grow your business, but it takes some work to navigate the landscape and decide where to focus your efforts in getting it. Without a sound incentives strategy, you run the risk of missing out. Odds are your competitors are accessing these funds. So should you!
For more information, visit EY’s guide to business tax incentives.