How much money do you leave on the table?

The SR & ED tax credit is the highest paying tax program in Canada. It offers refundable credits (so always checks) for SMEs. It is a particularly interesting program to claim wages, because in Quebec you can get up to 73.75% in government reimbursements. Let’s see what it is:

Note : credit rates discussed on this page are a combination of provincial and federal credits for activities in Quebec. 

Small and medium-sized enterprises (SMEs)

Canadian-controlled SMEs are defined as having less than $ 50 million of taxable assets and less than $ 500,000 of taxable net income in the previous year.

All their credits are refundable (two checks).

Usually SMEs that do a lot of SR & ED do not have taxable income and that is why they receive 2 checks.

But the client will not receive a check or a partial amount if he has tax to pay. The government refunds the tax before and issues the check for the difference

The first $ 50,000 of eligible SR & ED expenditures

This gives entitlement (Table 1) to refundable credits of 54.25% on salaries, 28% on unrelated subcontractors and 35% for materials consumed in SR & ED.

SMEs	Expenditures less than 50k $
Wages	54,25%
Non-related subcontractors	28%
Materials consumed	35%

Table 1 – SME – Combined Credits Rates Federal and Provincial (in Qc)

The excess of this $ 50,000 eligible expenditure for SR & ED

This gives entitlement (Table 2) to refundable credits of 73.75% on wages, 37.75% on unrelated subcontractors and 35% for materials consumed in SR & ED.

SMEs	Expenditures more than 50k $
Wages	73,75%
Non-related subcontractors	37,75%
Materials consumed	35%

Table 2 – SME Excess – combined credit rate Federal and Provincial (in Qc)

All credit rates discussed on this page are a combination of provincial and federal credits for activities in Quebec.

Large companies (GE)

Other companies are either large companies or foreign-controlled companies. THE QUARTER ABOUT THESE CREDITS IS REFUNDABLE (Quebec portion):

The first $ 225,000 of eligible SR & ED expenditures

This gives entitlement (Table 3) to credits of 23.25% on wages, 12% on non-related subcontractors and 15% for materials consumed in SR & ED.

Large Cies	Expenditures exceeding 225k $
Wages	23,25%
Non-related subcontractors	12%
Materials consumed	15%

Table 3 – GE – Combined Credits Rates Federal and Provincial (in QC)

The excess of this $ 225,000 eligible expenditure for SR & ED

This gives entitlement (Table 4) to credits of 35.15% on wages, 17.95% on non-related subcontractors and 15% for materials consumed in SR & ED.

Large Cies	Expenditures exceeding 225k $
Wages	35,15%
Non-related subcontractors	17,95%
Materials consumed	15%

Table 4 – Excess GE – Combined Credits Rates Federal and Provincial (in QC)

Your competitors are probably already claiming these credits. How much longer are you going to leave so much money on the table?

Important note: the information contained in this blog is for information only. Before evaluating or submitting a claim, you must consult an accounting or tax specialist and the relevant policies available on the Canada Revenue Agency (CRA) website.

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