Developments: Legislative proposals confirm SR&ED changes

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In the 2012 federal budget, the Department of Finance (Finance) announced a number of measures that reduce the benefits available under the Scientific Research and Experimental Development (SR&ED) tax incentive program.

Despite extensive industry feedback to reconsider or delay the measures, Finance has moved to implement their original, unmodified plans. Draft legislative proposals, released on August 14, 2012, include the following changes:


  • Capital expenditures for SR&ED will no longer qualify for investment tax credits (ITCs), including shared-use equipment previously claimable for partial ITCs.


  • The rate used for the proxy method of claiming overhead expenditures will be reduced from 65% to 55%.
  • Eligible contract payments and third-party payments will be only 80% claimable for ITCs.
  • The ITC rate for large corporations will be reduced from 20% to 15%. (The 35% refundable ITC for Canadian-Controlled Private Corporations (CCPCs) remains unchanged.)

These changes are discussed in this publication.