Most innovative businesses conduct their own research and development activities. These activities allow Canadian companies to stay ahead of their global competitors and consequently provide a valuable strategic advantage to the domestic economy. To support the competitiveness of Canadian companies, both provincial and federal governments have implemented assistance programs promoting research and development activities as well as intellectual property protection. Two such governmental funding assistance programs are:
1 Tax credits for Scientific Research and Experimental Development (SR&ED)
2 Quebec government assistance program for the development of intellectual property (IP)
These assistance programs, through non-refundable contributions and tax incentives, may have a significant impact on the funding of your innovations. To maximize the benefits of both related programs, it is important to establish efficient strategies. Are you taking advantage?
THE SR&ED PROGRAM CAN HELP FINANCE YOUR INNOVATIONS
Research and development activities represent a sound investment in the future of any innovative businesses wishing to stay ahead of its competition. As a further incentive, federal and provincial governments allow you to retrieve important sums invested in the development of your innovative ideas through the SR & ED program.
Qualifying Criteria
All businesses carrying out R&D work in Canada are eligible for SR&ED tax credits. Your projects simply need to meet the following three criteria:
o Technological uncertainty, i.e., you forecast technological difficulties and are unable to predict the project's outcome with certainty
o Technological advancement, i.e., the measure of your accomplishment in technological terms or the positive technological changes resulting from the project activities
o Technical content, i.e., the systematic approach used to have the project carried out by qualified personnel and the documents used to track R&D activities and their costs
Qualifying Expenditures
Qualifying expenditures generally include:
o Salaries and wages of employees performing SR&ED work
o Capital expenditures to acquire equipment used exclusively for R&D purposes
o External consultant fees (subject to certain qualifications)
o Certain expenditures to purchase materials consumed or manufactured for R&D or experimentation purposes
Excluded activities
Fees relative to business or sales activities such as:
o Administrative expenses
o Marketing expenses
o Business process development costs
Available assistance
Depending on the size of your business, its corporate status and your taxable turnover, you may be able to recuperate from 30% to 75% of qualifying expenditures which meet the qualifying criteria noted above. Imagine, your usual margin may be equal to a few percentage points or-at best-tens of percentage points of your expenditures in comparison with the SR&ED program credits available.
o Provincial and federal tax credits are refundable in cash for small to medium-size businesses.
o In the case of large businesses, federal tax credits may be applied to taxes payable whereas provincial tax credits may also be refundable in cash.
o There is no maximum amount applicable to your annual claims.
Procedure
The Canada Revenue Agency (CRA) requires businesses to comply with a given procedure when filing SR&ED projects. The applying company must, within 18 months of the end of a fiscal year:
o File a technical description the projects' eligible activities
o File federal and provincial SR&ED tax forms
THE GOVERNMENT OF QUEBEC HELPS BUSINESSES DEVELOP THEIR INTELLECTUAL PROPERTY
Innovative businesses invest much time, effort, and money in their research and development programs. Some, however, do not realize that by not adequately protecting their innovations and commercial developments through patents, industrial designs or trademarks, they risk seeing their innovative solutions freely exploited by their competitors. Indeed, in this day and age of global economy, the intellectual capability of a business, rather than strictly its manufacturing capability, has become tremendously important.
To promote global competitiveness, the Government of Quebec adopted measures aimed at helping Quebec businesses protect their innovations through the Intellectual Property section of the Assistance Program for Businesses, implemented by the Ministry of Economic Development, Innovation and Export Trade (MDEIE).
Qualifying Criteria
The qualifying criteria for the new Intellectual Property program are the same as those generally applicable to the Assistance Program for businesses, i.e.:
o Quebec businesses having fewer than 200 employees
o Additional criteria may be used, reflecting specific governmental and regional policies
Eligible Activities
Assistance is provided to cover professional fees related to the following eligible activities:
o Preparation of patent applications and applications to register industrial designs
o Patentability searches and trade mark clearance searches and opinions
o Searches and opinions regarding freedom to operate
o Preparation of applications to register trade marks and copyrights
o Acquisition of intellectual property assets
Excluded Activities
Fees payable on or after the filing of applications such as:
o Filing fees
o Examination fees
o Professional fees incurred in prosecuting the application
o Annual maintenance fees
Available Assistance
The program provides a non-refundable contribution covering up to 40% of eligible expenditures subject to the following limitations:
o Annual maximum of up to $50,000 per business (depending on regions)
o Maximum government assistance (all government assistance programs combined) not to exceed 50% of total project costs, including, amongst others, the SR&ED program.
Procedure
To obtain a contribution under the MDEIE program, the applicant must:
o File its application before undertaking the project
o Include the service offer of an intellectual property firm
o Submit its application to the MDEIE office servicing the region where the business operates
o Enter a contract with an intellectual property firm once the project has been approved by the MDEIE
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