2024 Fall Economic Statement proposes measures aimed at enhancing scientific research and experimental development program

The scientific research and experimental development (SR&ED) tax credit is the largest federal government tax incentive program supporting Canadian companies that conduct research and development in Canada. The SR&ED program provides for an investment tax credit on qualifying expenditures incurred in Canada. Generally, taxpayers benefit from a 15 percent non-refundable tax credit on qualified expenditures, while Canadian-controlled private corporations (CCPCs) are eligible for an enhanced 35 percent refundable credit on their first $3 million of qualified expenditures.

The 2024 Fall Economic Statement proposes new measures aimed to enhance the SR&ED program, effective for taxation years beginning on or after December 16, 2024. These measures include:

• Increasing the annual expenditure limit for CCPCs from $3 million to $4.5 million, resulting in a qualifying CCPC able to claim fully refundable tax credits of up to $1.575 million per year (at the 35 percent rate).
• Increasing the prior-year taxable capital phase-out thresholds for determining the SR&ED enhanced credit limit from $10 million and $50 million to $15 million and $75 million, respectively.
• Extending eligibility for the enhanced refundable tax credit (i.e., historically only available for CCPCs) to eligible Canadian public corporations. An eligible Canadian public corporation would be a corporation that, throughout the taxation year:
  • is a resident in Canada;
  • has shares listed on a designated stock exchange; and
  • is not controlled directly nor indirectly in any manner by one or more non-resident persons.
• An eligible Canadian public corporation would be eligible for the enhanced 35 percent credit rate for up to the $4.5 million expenditure limit, but this limit would be gradually reduced where taxable capital employed in Canada for the previous taxation year is between $15 million and $75 million. Credits earned in excess of their expenditure limit would be eligible for the 15 percent non-refundable credit rate.
• Restoration of the eligibility of capital expenditures (which had been removed from eligibility effective 2014) for both the deduction against income and the investment tax credit components of the SR&ED program, effective for property acquired on or after December 16, 2024.

Further details on the proposed changes to the SR&ED program are set to be announced in the 2025 Federal Budget.

More information

For more information on the proposals, please refer to the government backgrounder available here.

If you have any questions about these proposals, please contact any member of our National Tax Group.