Broadly speaking, SR&ED incentives take the form of immediate deductions for qualifying current expenditures and a 15% investment tax credit that may be applied to reduce income tax owing. Investment tax credits may be carried over and applied in other taxation years subject to limits in the Tax Act. More generous SR&ED incentives are available to qualifying CCPCs – namely, a 35% fully refundable tax credit for the first $3 million of current SR&ED expenditures. Provinces may also provide incentives for SR&ED carried on within their jurisdictions. Québec provides for fully refundable income tax credits of up to 30% with respect to salaries paid to employees working on SR&ED projects undertaken in Québec. Other Québec incentives include a 28% tax credit for eligible expenditures for research carried out by a university or public research centre and a tax holiday (i.e., full or partial exemption from Québec income tax on employment income) for foreign researchers for up to five years. Clean Investment Tax Credits The federal government currently offers a wide range of tax incentives for investments in Canada's renewable energy sector, including four investment tax credits. Clean Technology Investment Tax Credit. This is a reduction in taxable income or a refund equal to 30% of the capital cost of eligible equipment purchased, which would notably include qualifying equipment used to generate electricity from solar, wind, water or geothermal energy; from concentrated solar energy; or from small modular nuclear reactors; and qualifying stationary electricity storage equipment that does not use fossil fuels (e.g., batteries). The tax credit is intended to apply to property acquired and becoming available for use on or after March 28, 2023. Its availability would require compliance with several conditions, including labour requirements.
In recent years, the CRA has become more aggressive in its auditing of transfer pricing records.
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Doing Business in Canada
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