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SR&ED tax credits and stacking of R&D government
assistance: are you maximizing your project funding? Dr. David ArsenaultResearch and Technology ManagerSR&ED- Atlantic Region
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Stacking
Refers to the total financial assistance that can be received from different governmental
sources by a given recipient
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Total Government Assistance (TGA)
Upper limit of TGA set by Transfer Payment Policy of the Treasury Board of Canada
Activity Stacking limitSocial program(e.g., core funding)
100%
Social program(e.g., training)
90%
Economic program(e.g., R&D)
75%
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Stacking calculations
The Treasury Board of Canada requires that the terms and conditions in government assistance agreements demonstrate that due consideration has been given to stacking.
Managers of the various assistance programs should expect that other government entities may be interested in participating in the funding of a particular project.
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• Other federal government departments
• Other government sources (provincial and municipal)
• The recipient itself is contributing to the project
Stacking calculations
The percentage of total government assistance (TGA) must be stated explicitly in the terms and conditions of assistance agreements:
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SR&ED vs. R&D
ConceptProduct / process
1. In house knowledge/technology base
2. Public domain information/outside expertise
3. Experimentation/analysis to overcome identified scientific/technological uncertainty SR&ED
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Complicating factors
The majority of governmental R&D funding programs involve applying for the funding before the work is carried out.
SR&ED tax incentives from the CRA are obtained after the work was carried out (and expenditures have been incurred) through the filing of the tax return.
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Uncertainty in calculating stacking
ACOA
NSERC
IRAP
SR&ED?
75 %
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Unrealized project funding
ACOA
NSERC
IRAP
SR&ED
75 %
Expected
ACOA
NSERC
IRAPSR&ED
After CRA claimreview
Fundinggap
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SR&ED legislation
Eligibility of project work: Ss. 248(1) of the ITA
Eligibility of expenditures: Ss. 37 and Ss. 127
CRA-SR&ED staff are specialists the administration of the Income Tax Act
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Pre-Claim Project Review(PCPR)
• Free advisory service
• Preliminary opinion of eligibility of project work and expenditures
• Recommend that consent forms be drafted
Exceeding the stacking limit
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ACOA
NSERC
IRAP
SR&ED
75 %
Expected
ACOA
NSERC
IRAP
After CRAclaim review
Fundingexcess
SR&ED
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The CRA is ultimately not responsible of ensuring that stacking limitations of the Treasury Board of Canada are met.
Given that the SR&ED Program is an entitlement program, any work and related expenditures incurred that meet the requirements of the Income Tax Act will result in tax credits being allowed to taxpayers, regardless of stacking
Exceeding the stacking limit
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Questions?
Contact information:
Dr. David ArsenaultResearch and Technology ManagerSR&ED Program – Atlantic RegionTel: 506-851-3358E-mail: [email protected]