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May 19, 2024

Tax Perspectives

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Please note that these publications may not be up-to-date as taxation matters are subject to frequent changes.

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Spring 2002
Volume 1, Number 3

The information in Tax Perspectives is prepared for general interest only. Every effort has been made to ensure that the contents are accurate. However, professional advice should always be obtained before acting on the information herein.

Provincial R & D Incentives

The provinces have never managed to agree on a standard R & D incentive. The only thing they seem to agree on is that, if the neighbouring province has an incentive policy, they need one as well. But like other things Canadian, there are exceptions—neither PEI nor Alberta has a separate provincial incentive. Perhaps Alberta's low provincial tax rate is incentive enough.

R & D performers must remember to claim the relevant provincial credit for each of the provinces in which they perform SR & ED. It is also important to know the provincial strategy with regard to refundability and the potential to renounce a provincial credit.

In brief, a provincial tax credit is taxable federally, and reduces theTable of Tax Incentives
for SR & ED By Province
expenditure base on which the federal credit is earned. Therefore, if a provincial tax credit is renounced, the federal credit is increased. This may be important in a loss year if a provincial credit is nonrefundable. As can be seen, the failure to claim these provincial credits in an optimal way denies a taxpayer a substantial portion of the benefit.

Click on the table on the left to view a summary of the provincial credit rates and options.

Provincial incentives comprise three main groups: (1) refundable tax credits, (2) non-refundable tax credits, and (3) incentive deductions.

Refundable tax credits result in a refund whether or not the entity is taxable, while non-refundable tax credits may be claimed only against a provincial tax liability.

Incentive deductions give a deduction of over 100% of the expenditure as an additional incentive.