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Estimate your federal and provincial SR&ED credits from eligible salaries, contractor costs and materials, using the proxy method.
Qualifying Canadian-controlled private corporations earn a 35% refundable federal investment tax credit on eligible R&D spending, up to an annual expenditure limit. Most provinces add their own credit on top.
Under the proxy method, a percentage of eligible salaries is added to cover overhead, so you don’t have to track overhead costs separately.
Salaries for time spent on the experimental work, 80% of arm’s-length Canadian contractor costs, and materials consumed or transformed in the work. Routine development, market research and quality control do not qualify.
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A Canadian-controlled private corporation can receive a 35% refundable federal credit on qualifying expenditures, plus a provincial credit in most provinces. Combined, many startups recover a large share of their R&D salary costs.
Instead of tracking overhead, you add a prescribed proxy amount of 55% of eligible salaries to your expenditure pool.
You have 18 months after the end of the tax year in which the expenses were incurred to file your claim.
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