What is SR&ED? A Founder's Guide to Canada's R&D Tax Credit

The Scientific Research and Experimental Development (SR&ED) program is Canada's largest tax incentive for R&D. If you're building something new - whether that's software, hardware, biotech, or anything in between - you may be leaving significant money on the table. ## What is SR&ED? SR&ED (pronounced "shred") is a federal tax incentive that encourages Canadian businesses to conduct research and development in Canada. It's administered by the Canada Revenue Agency (CRA) and provides refundable or non-refundable tax credits on qualifying R&D expenditures. ## Who Qualifies? Any Canadian business performing work that meets three criteria: 1. **Technological advancement** - You're trying to achieve something that goes beyond current practice 2. **Scientific or technological uncertainty** - The outcome isn't guaranteed; you're solving problems where the path forward isn't obvious 3. **Systematic investigation** - You're following a methodical approach, not just trial and error ## How Much Can You Get? For Canadian-Controlled Private Corporations (CCPCs): - Up to 35% refundable credit on the first $3M of eligible expenditures - 15% non-refundable credit on expenditures beyond $3M Provincial credits vary but can add another 3-14% depending on your province. ## What Expenses Qualify? - Salaries and wages for employees engaged in R&D - Contractor payments (at 80% of the cost) - Materials consumed in R&D - Overhead costs (typically calculated using the proxy method) ## The Bottom Line If you're doing any kind of product development or innovation, SR&ED is likely worth exploring. The credits can significantly improve your runway and give you capital to reinvest in building. At Wavecrest Strategies, we help founders navigate SR&ED so they can focus on what they do best - building. [Get in touch](/contact) for a free assessment.