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. Credits can be fully claimed against a taxpayer's provincial or territorial income tax.
2012-2013 provincial and territorial R&D tax credit changes
See our Developments ‘Alberta’s SR&ED changes clarified.'
|For R&D expenditures incurred||Rate||Refundable?||Carry back||Carry forward|
|Dec. 31/2008||n/a||10% ||Yes ||n/a|
|Qualifying CCPCs||Aug 31/1999||Sep. 1/2014
|Corporations in general||No||3 yrs||10 yrs |
|Mar. 8/2005||n/a||20%||Yes/No |
|Mar. 11/1992||Mar. 9/2005||15%|
|Feb. 25/1994||Jan. 1/2003||10%||No||3 yrs||7 yrs|
Newfoundland and Labrador
|No territorial R&D tax incentives|
|Tax years ending
|Dec. 31/1983||Tax years ending
|10%||No||3 yrs||7 yrs|
|No territorial R&D tax incentives|
|Innovation tax credit (OITC)||Tax years ending May 4/1999 ||n/a||10% ||Yes||n/a|
|Business research institute tax credit (OBRI)||May 6/1997||20% |
|R&D tax credit
|Tax years ending Dec. 31/2008||4.5%||No||3 yrs
Prince Edward Island
|No provincial R&D tax incentives|
|R&D wage tax credit ||April 21/2005||n/a||17.5% or 37.5%  ||Yes||n/a|
|June 12/2003||April 22, 2005||17.5% or 35% |
|Tax years beginning
May 9/1996 
|June 13/2003||20% or 40%
|University, public research centre and research consortium tax credit  ||June 12/2003||n/a||35% |
|April 30/1987||June 13/2003||40% |
|Tax credit on dues and fees paid to a research consortium ||May 14/1992||June 13/2003||40%|
|Private partnership tax credit  ||March 23/2006||n/a||35%|
|June 12/2003||March 24/2006||35%|
|Jan. 1/1997||June 13/2003||40%|
|Corporations in general||March 31/2012||n/a||15%||No||3 yrs||10 yrs|
|March 18/2009||April 1/2012|
|Qualifying CCPCs||n/a||Yes ||n/a|
|All corporations||March 19/1998||March 19/2009||No||3 yrs||10 yrs|
|June 30/2000 or Dec. 31/2000 ||n/a||15% ||Yes||n/a|
 Alberta's credit equals 10% of eligible SR&ED expenditures to a maximum expenditure level of $4 million (maximum credit is $400,000). For taxation years ending after March 31, 2012, taxpayers will no longer be required to deduct the federal SR&ED investment tax credit when calculating Alberta's SR&ED refundable tax credit. For related technical changes, see our Developments ‘Alberta’s SR&ED changes clarified.’
 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:
 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) that must be shared by associated corporations. The expenditure limit is reduced when:
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.
The following table provides a history of the expenditure limit and taxable income thresholds discussed above.
|Expenditure limit||Taxable income thresholds||Maximum annual credit|
|Phase-out starts (i)||Phase-out ends|
|Taxation years ending||before 2003||$2 million||$200,000||$400,000||$200,000|
|after February 25, 2008 (ii)||$3 million||$700,000||$300,000|
|generally, after 2009 (iii)||$500,000||$800,000|
 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 (except in certain cases, the rate is 27.5% for biopharmaceutical corporations — see footnote 11). 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.
The following table provides a history of the spending limit and asset thresholds discussed above.
|Spending limit||Asset thresholds|
|Phase-out starts||Phase-out ends|
|Effective||before December 5, 2006||$2 million||$25 million||$50 million|
|after December 4, 2006||$50 million||$75 million|
|taxation years ending after March 13, 2008||$3 million (i)|
(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 after March 13, 2008.
In addition, the 37.5% rate was 35% for R&D expenditures incurred before April 22, 2005. For expenditures incurred before June 13, 2003, the 35% rate was 40% and the 17.5% rate was 20%.
 Quebec's November 20, 2012 budget increases the R&D wage tax credit base rate from 17.5% to 27.5% for eligible biopharmaceutical corporations in Quebec that incur R&D expenditures after November 20, 2012, and before January 1, 2018 (i.e. the credit rate will be 27.5% to 37.5%, instead of 17.5% to 37.5% — see footnote 10).
 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 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:
 Quebec's November 20, 2012 budget includes in the taxpayer's income, Quebec R&D refundable tax credits received by the taxpayer after November 20, 2012, that relate to R&D expenditures incurred for taxation years starting after November 20, 2012.
 For R&D expenditures incurred after March 31, 2012, Saskatchewan's 15% tax credit is refundable only for Canadian-controlled private corporations (CCPCs) and only on qualifying expenditures incurred up to the federal R&D expenditure limit (i.e. $3 million or less) annually.
 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 - 2013. For federal tax purposes, most current expenditures and before 2014, 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.