Canada Revenue Agency (CRA)
The SRED tax credit in Canada is administered by Canada Revenue Agency or CRA (formerly known
as CCRA and Revenue Canada). This federal government incentive program funds 35% of eligible expenditures for certain Canada Controlled Private Corporations (CCPCs) and 20% for other types of entities to encourage R & D. You can think of CRA as being the silent partner in your R&D program, who contributes his share after you have commenced your program, found sources of funds and spent the money.

The SRED tax credit in Canada has traditionally been delivered by CRA because of its logical linkage to Income Taxes through its Investment Tax Credit nature. A highly specialized area based on core income tax legislation but administered under strict Income Tax Regulations, it is also influenced by constantly changing administrative guidelines and interpretation. To explain less than 6 pages in the Income Tax
Act (see last section below), CRA has published approximately 73 papers (Interpretation Bulletins, Information Circulars, Application Policies, sector-specific papers, etc) amounting to approximately 6 inches thick of relevant material, parts of which may influence your project conducted in Canada with respect to how to properly apply for and receive these Income Tax Credits. We are familiar with
every inch.

The Three Criteria
Probably no two of us would arrive at the same definition of SR&ED or even R&D. However, as established through case law, for the SRED tax credit in Canada it is the Income Tax Act that is the
final arbitrator. In addition to what most people think of as “research and development” (i.e. activity in laboratories), “Experimental Development” is funded, comprising some 95% of the program’s funding.
At the core of Experimental Development are three requirements:

        Technological Advancement for the purpose of creating or improving a product,
          process, material, or device
        Technological Uncertainty
        Technological Content (i.e. systematic investigation by qualified personnel
          with appropriate documentation)

Do I Qualify For Research Funding in Canada Through SR&ED?
How Does TSGI Help to Determine If I Do?
TSGI conducts an up-front screening process to ensure that your company’s experimental / development project meets these criteria before you invest any time in the SR&ED tax credit application process. The work need not be a patentable or even brand-new invention so long as the above criteria are met. The starting indicator of whether your company might qualify is if you are creating (or making incremental improvements to) a product, process, device, or material. If so, you should be talking to us, and we will use our time to conduct a more in-depth examination. Based on TSGI’s expertise with the program, we work alongside you and ensure the application process is relieved from your shoulders as much as possible to maximize this important opportunity for research funding in Canada for your company.

Nothing Like the Real Thing: The Income Tax Act Definition of SR&ED
“Systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis and that is:

     (a) basic research, namely, work undertaken for the advancement of scientific knowledge without a           specific practical application in view,
     (b) applied research, namely, work undertaken for the advancement of scientific knowledge with a           specific practical application in view, or
     (c) experimental development, namely, work undertaken for the purpose of achieving technological           advancement for the purpose of creating new, or improving existing, materials, devices, products           or processes, including incremental improvements thereto, and, in applying this definition in           respect of a taxpayer, includes
     (d) work undertaken by or on behalf of the taxpayer with respect to engineering, design, operations           research, mathematical analysis, computer programming, data collection, testing and           psychological research where the work is commensurate with the needs, and directly in support,           of work described in paragraph (a), (b) or (c) that is undertaken in Canada by or on behalf of
          the taxpayer, but does not include work with respect to
     (e) market research or sales promotion,
     (f)  quality control or routine testing of materials, devices, products or processes,
     (g) research in the social sciences or the humanities,
     (h) prospecting, exploring or drilling for, or producing, minerals, petroleum or natural gas,
     (i)  the commercial production of a new or improved material, device or product or the commercial           use of a new or improved process,
     (j) style changes, or
     (k) routine data collection."

     Source: subsection 248(1) of the Canadian Income Tax Act.