Canada offers one of the most favourable packages of R&D tax incentives among the major industrialized countries. In addition to the federal incentives, taxpayers carrying on R&D can also benefit from provincial or territorial tax credits. To help individuals and corporations maximize their potential R&D tax incentives, a summary of the rules for provincial and territorial R&D tax credits follows.
All R&D tax credits are available to corporations. In Newfoundland and Labrador, Quebec and the Yukon, individuals can also claim the credits. The credits can be fully claimed against a taxpayer's provincial or territorial income tax. In Ontario and Quebec, R&D tax credits (except for Ontario's R&D Tax Credit) can also offset capital taxes.
 Alberta's credit equals 10% of eligible SR&ED expenditures to a maximum expenditure level of $4 million (maximum credit is $400,000).
 British Columbia extended its SR&ED tax from August 31, 2004 to August 31, 2009 and then to August 31, 2014.
 British Columbia's refundable R&D tax credit is limited to 10% of the lesser of: (a) eligible British Columbia R&D expenditures and (b) the federal R&D expenditure limit (i.e., $3 million or less for taxation years ending after February 25, 2008).
 Manitoba's 20% credit is:
 Manitoba extended the carry-forward period from 7 years to 10, for 2004 and later taxation years.
 Ontario corporations qualify for the refundable tax credit on qualified expenditures incurred up to the expenditure limit ($3 million* or less) and must be shared by associated corporations. The expenditure limit is reduced when:
* Increases to the expenditure limit and taxable income thresholds follow:
(i) The taxable income thresholds have increased as a result of increases in the federal small business limit.
(ii) To determine the expenditure limit for a taxation year that includes February 26, 2008, separate calculations with the old and new phase-out ranges are required.
(iii) The thresholds apply to a taxation year only if the previous taxation year ends after 2008.
100% of current expenditures and 40% of capital expenditures are eligible for the credit.
The OITC was originally available to Canadian-controlled private corporations for taxation years ending after December 31, 1994. For taxation years ending after May 4, 1999, the credit is extended to all public and private corporations and is no longer limited to the amount eligible for the federal 35% R&D tax credit.
 Ontario's credit is calculated as 20% of qualifying payments (up to $20 million annually on an associated basis) to Ontario eligible research institutes. The maximum annual credit is $4 million.
 For taxation years ending after 2008, the R&D tax credit replaces Ontario's deduction for the portion of the federal investment tax credit relating to qualifying Ontario R&D expenditures. The credit can be carried back only to taxation years ending after 2008.
 Before this date, Quebec's R&D wage tax credit was subject to different eligibility criteria, rates and restrictions.
 Quebec Canadian-controlled corporations with less than $50 million* in assets, on an associated basis, can claim the 37.5% rate on up to the spending limit of $3 million* of R&D wages, on an associated basis. For those with assets between $50 million* and $75 million*, the 37.5% rate is gradually reduced to 17.5%. The rate is 17.5% for all other taxpayers. The rate increased from 35% to 37.5% on R&D expenditures incurred after April 21, 2005. For expenditures incurred before June 13, 2003, the 35% rate was 40% and the 17.5% rate was 20%. 50% of payments to arm's length subcontractors are eligible for the credit. All thresholds are in respect of the previous year, on a worldwide associated basis.
* Increases to in the spending limit and asset thresholds follow:
(i) For taxation years that include March 13, 2008, the $3 million spending limit is pro-rated based on the number of days in the taxation year that are after March 13, 2008.
 Corporations that qualified for Quebec's R&D wage tax credit at the 40% rate (i.e., Canadian-controlled corporations with assets under $25 million) qualified for an additional 15% tax credit based on the increase in all R&D expenditures over the average expenditures in the last three taxation years. This additional credit was to have been available to eligible corporations until taxation years beginning before July 1, 2004, but its expiry was accelerated to taxation years beginning after June 12, 2003.
 In some cases, Quebec's 35% (40% before June 12, 2003) credit is available on 80% of payments to certain eligible entities (e.g., universities and public research centres).
 The Quebec tax credit for private partnerships replaced the pre-competitive research tax credit.
 The credit applies to qualified expenditures incurred in the Yukon after June 30, 2000 for corporations, and after December 31, 2000 for individuals.
 Yukon's rate is 20% on R&D expenditures made to the Yukon College.
Among the major industrialized countries, Canada offers one of the most favourable packages of R&D tax incentives, which includes provincial and territorial tax credits available to corporations that conduct qualified SR&ED in the particular jurisdiction.
In addition to provincial and territorial incentives, corporations carrying on SR&ED can also benefit from federal tax credits discussed in Federal investment tax credits for R&D and property: 2011 - 2012. For federal tax purposes, most current and certain capital expenditures on account of SR&ED are deductible. Provincial and territorial tax credits are considered to be government assistance for federal tax purposes, and therefore reduce expenditures that are eligible for the federal SR&ED deduction and federal investment tax credits.