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Canada Revenue Agency
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About Our Program


What is the SR&ED Program?

The Scientific Research and Experimental Development (SR&ED) program is a federal tax incentive program to encourage Canadian businesses of all sizes and in all sectors to conduct research and development (R&D) in Canada that will lead to new, improved, or technologically advanced products or processes. The SR&ED program is the largest single source of federal government support for industrial research and development.

Claimants can apply for SR&ED investment tax credits for expenditures such as wages, materials, machinery, equipment, some overhead, and SR&ED contracts.

It should be noted that the CRA is responsible for administering the SR&ED program, while the Department of Finance is responsible for the legislation that governs it.

Who qualifies?

Generally, a Canadian-controlled private corporation (CCPC) can earn an investment tax credit (ITC) of 35% up to the first $2 million of qualified expenditures for SR&ED carried out in Canada, and 20% on any excess amount. Other Canadian corporations, proprietorships, partnerships, and trusts can earn an ITC of 20% of qualified expenditures for SR&ED carried out in Canada.

Generally, a CCPC with a taxable income in the immediately preceding year that does not exceed the business limit may receive a portion of the ITC earned as a refund, after applying these tax credits against taxes payable.

The ITC earned by a Canadian corporation that is not a CCPC is non-refundable, but may be used to reduce any taxes payable. The ITC earned by a proprietorship or certain trusts may be partially refunded after applying these tax credits against taxes payable.

What kind of projects qualify?

To qualify for the SR&ED program, work must advance the understanding of scientific relations or technologies, address scientific or technological uncertainty, and incorporate a systematic investigation by qualified personnel.

Work that qualifies for SR&ED tax credits includes:

  • experimental development to achieve technological advancement to create new materials, devices, products, or processes, or improve existing ones;
  • applied research to advance scientific knowledge with a specific practical application in view;
  • basic research to advance scientific knowledge without a specific practical application in view; and
  • support work in engineering, design, operations research, mathematical analysis, computer programming, data collection, testing, or psychological research, but only if the work is commensurate with, and directly supports, the eligible experimental development, or applied or basic research.

The following activities are not eligible for benefits under the program:

  • social science and humanities research;
  • commercial production of a new or improved material, device, or product, or the commercial use of a new or improved process;
  • style changes;
  • market research or sales promotion;
  • quality control or routine testing of materials, devices, products, or processes;
  • routine data collection;
  • prospecting, exploring, or drilling for or producing minerals, petroleum, or natural gas; and
  • development based solely on design or routine engineering practice.

How do businesses apply for the tax credit?

Complete Form T661, Claim for Scientific Research and Experimental Development (SR&ED) in Canada. Also complete one of the following:

  • Schedule T2SCH31, Investment Tax Credit - Corporations, if you are a corporation; or
  • Form T2038(IND), Investment Tax Credit (Individuals), if you are an individual.

All the information in these forms is prescribed information.

You should submit your claim with your T2 corporation or your T1 individual income tax return, or within 12 months of your income tax return's filing due date for the year in which the SR&ED expenditure was incurred. As a result, corporations have 18 months to file Form T661 and Schedule T2SCH31, while individuals have 17 1/2 months to file Form T661 and T2038(IND).

For more information, see our forms and publications or contact your tax services office.

How long will it take to process your claim?

To ensure that your claim is processed in a timely manner, the SR&ED program has established service standards that we are committed to meet.