Developments: Contract Payments and their Complexities — A Refresher

When a Canadian taxpayer contracts scientific research and experimental development (SR&ED) work by an arm's length party, the amount paid:

• Is an SR&ED expenditure
• Earns an SR&ED investment tax credit (ITC)

To prevent duplication of ITCs between a Canadian payer and a performer, the contractor that performs the SR&ED work must reduce the amount of their SR&ED expenditures or risk ineligibility by the amount of their contract payment. However, identifying a contract payment can be difficult and may have a significant impact on an SR&ED claimant's entitlement. To learn the eligibility indicators that the Canada Revenue Agency looks for in a contract, read Developments: Contract Payments and their Complexities — A Refresher below.

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