Conclusion
Canadian companies generally have been investing less in R&D now than in the past. The need to increase investment in R&D makes the SR&ED program more important than ever.
On 15 April 2024, in response to a consultation launched by the Department of Finance on 31 January with respect to cost-neutral ways to modernize and improve the SR&ED program, a submission was made by EY Canada with various recommendations, including:
- Revising the program to make the ITC refundable for all companies to have the greatest impact on incenting more R&D investment in Canada;
- Reviewing the ITC rate of 15% for non-refundable claims to assess whether the rate is globally competitive; and
- Reconsidering the current requirement to be a CCPC to earn a 35% ITC, as well as the related $50 million taxable capital limit, in light of the current Canadian business environment.
The changes tabled in the FES on 16 December 2024 should help Canadian companies increase their investment in R&D and, in turn, help boost the percentage of GDP spent on R&D activities. The FES indicates that these proposed changes should provide support to innovative businesses estimated at $1.9 billion over six years, starting in 2024–25, with $370 million per year ongoing. It further states that a portion of this support will be sourced from existing Budget 2024 funding (i.e., $750 million over five years, starting in 2025–26, with $150 million per year ongoing).
It is our view that the changes proposed in the FES are consistent with the recommendations included in our submission to the Department of Finance.
Learn more
For further information or assistance in reviewing the proposed changes and how they may impact your business, please contact one of the following EY advisors.
Toronto
Susan Bishop
+ 1 416 943 3444 | susan.g.bishop@ca.ey.com
Dharmesh Gandhi
+1 416 932 5755 | dharmesh.gandhi@ca.ey.com
Matthew Pearson
+1 416 932 4176 | matthew.pearson@ca.ey.com
Martin McLaughlin
+1 416 932 5751 | martin.mclaughlin@ca.ey.com
Jason Zhu
+1 416 932 6204 | jason.zhu@ca.ey.com
Atlantic Canada
Brett Copeland
+1 902 421 6261 | brett.copeland@ca.ey.com
Quebec
Patrick D’Astous
+1 514 879 2831 | patrick.dastous@ca.ey.com
Nassim Bennacer Langlois
+1 514 879 8097 | nassim.bennacer@ca.ey.com
Prairies
Korey Conroy
+1 403 956 5778 | korey.conroy@ca.ey.com
Dean Anderson
+1 306 649 8354 | dean.anderson@ca.ey.com
British Columbia
Sean Verret
+1 604 891 8341 | sean.verret@ca.ey.com
Mo Mostafaei
+1 604 891 8208 | mo.mostafaei@ca.ey.com
Rod Hynes
+1 604 831 0327 | rod.s.hynes@ca.ey.com
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