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The SR&ED tax credit pays a Canadian company back for qualifying research and development work. For most Canadian-controlled private corporations (CCPCs) the rate is 35% on up to $6 million of qualifying spending a year, and most of that can come back as cash even if the company owes no tax. Anything above the limit earns 15%.
This page is about corporations. Individuals and trusts are treated differently.
What is the SR&ED tax credit, and who gets the 35% rate?
SR&ED stands for Scientific Research and Experimental Development. It’s the federal program that turns eligible R&D spending into an investment tax credit, which is a credit against tax owing and, for some companies, a refund.
The 35% rate is the higher one. According to the CRA’s page on the SR&ED investment tax credit, CCPCs and eligible Canadian public corporations can earn it for tax years that begin after December 15, 2024, up to an expenditure limit of $6 million. Before that date the limit was $3 million. A company that isn’t a CCPC, or that spends past the limit, gets the basic 15%.
The limit also shrinks as a CCPC gets bigger. For years after December 15, 2024, the reduction starts at $15 million of taxable capital and the limit is gone at $75 million. Public corporations face a separate test based on three-year average revenue.
| Item | Amount |
|---|---|
| Basic credit rate | 15% |
| Higher rate (CCPC, tax years after Dec 15, 2024) | 35% up to the limit |
| Expenditure limit, years before Dec 16, 2024 | $3 million |
| Expenditure limit, years after Dec 15, 2024 | $6 million |
| Refundable share of the 35% credit on current spending | 100% |
| Refundable share of the 35% credit on capital spending | 40% |
| CCPC taxable capital phase-out, new rules | $15 million to $75 million |
| Corporation’s deadline to file the claim (Form T661) | 18 months after the tax year end |
| Unused non-refundable credit | Carry back 3 years, forward 20 years |
Does my work count as SR&ED?
This is where most claims get stuck. Being innovative isn’t enough, and neither is building something that’s new to the market.
The CRA asks three things. Was there scientific or technological uncertainty, meaning you didn’t know whether the goal could be reached, or how, from what’s generally known? Did you go at it through a systematic investigation? And did the work aim at advancing knowledge? Routine engineering, applying a known method, or tuning a product to a customer’s needs usually doesn’t pass.
A software company might write a great deal of code in a year and have only a small slice of it qualify: the part where the team truly didn’t know whether a technical approach would work, tried things, hit walls and learned something. Keep the notes that show it.
How much does a claim come to?
Here’s a plain example, worked by hand rather than with a calculator. A CCPC spends $200,000 on qualifying current expenditures, mainly wages of staff working on the eligible project. The credit is 35% of that, which is $70,000. Because it’s current spending, the company gets it back in full as a refund when it doesn’t have enough tax to use it, subject to the limits above.
Now spend $7 million. The first $6 million earns 35%, which is $2.1 million. The last $1 million earns 15%, which is $150,000. The total is $2.25 million.
Capital spending is treated more tightly. Say the same company also buys $50,000 of qualifying equipment. At 35% the credit is $17,500, but only 40% of it is refundable, which is $7,000. The other $10,500 isn’t paid out. It reduces the company’s tax, and any leftover carries forward.
How the credit interacts with your deductions is a T2 matter for your accountant. To see what the company’s base tax bill looks like, the corporate tax calculator gives a rough combined rate by province.
When is the SR&ED claim due?
Later than the tax return, but not as late as people assume. A corporation has 18 months after its tax year end to file Form T661, which is six months for the T2 return plus 12 more. A company with a December 31, 2026 year end, for example, has until June 30, 2028.
The CRA’s SR&ED filing requirements policy is blunt about what happens if you miss it: the CRA can’t by law allow extra time, and the spending doesn’t count as SR&ED. Put the date in the calendar when the year starts, well before tax time.
What if the company isn’t a CCPC, or can’t use the whole credit?
A company that isn’t a CCPC still earns the basic 15% on its qualified spending. That credit works against tax payable. When there’s more credit than tax, the unused part can be carried back up to 3 tax years or forward up to 20.
The same carryover applies to the non-refundable slice of a CCPC’s credit, like the $10,500 above.
What goes wrong with SR&ED claims?
Mostly three things. First, weak records. You need project notes, timesheets and payroll that tie to specific work, and reconstructing them after the fact is painful.
Second, claiming too much. Staff time spent on support, marketing or ordinary maintenance doesn’t qualify, and a claim that puts everything in tends to draw questions.
Third, the clock. Because the deadline is a hard one, a claim filed a few weeks late can mean a lost credit, even when the work was real.
Wages are the usual main cost. If you’re weighing what a hire costs, the payroll remittance calculator shows the employer share of CPP and EI on top of pay. To check whether a project pays off before the credit, the ROI calculator is a quick test. The payroll deductions calculator covers the other side, the employee’s net.
Plenty of companies hire a consultant to prepare the claim. Fees vary, and this site doesn’t recommend any firm, so ask how the fee is set and whether it climbs with the size of your refund.
Where these figures come from
The rates, the $6 million limit, the refundable shares, the phase-out band and the carryover periods are from the CRA‘s investment tax credit page for SR&ED, read in October 2026. The 18-month deadline comes from the filing requirements policy linked above. The tests for eligible work come from the CRA’s guidance on the eligibility of work. This is an independent site, not a government service, so check the CRA’s pages before you file.
Frequently asked questions
What is the SR&ED tax credit?
It's a federal investment tax credit for eligible research and development done in Canada. It reduces tax owing and, for many private companies, can be paid out as a refund.
What rate applies to a CCPC?
35% up to the expenditure limit, which is $6 million for tax years beginning after December 15, 2024. Spending above the limit earns 15%.
Is the credit refundable?
For CCPCs at the enhanced rate, the CRA lists 100% refundable on current expenditures and 40% on capital expenditures, up to the limit.
Does routine product work qualify?
Usually not. The work needs real technological uncertainty, a systematic investigation and an aim of advancing knowledge.
When do I submit the claim?
The CRA says to submit it with the income tax return for the year. We couldn't confirm the exact claim deadline, so check the CRA page.
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