SR&ED Qualification Overview

The Scientific Research and Experimental Development ("SR&ED" pronounced "sred") Tax Refund is a government tax-based incentive program which rewards Canadian businesses who develop new or improved products or processes.

Under this program, the federal government pays out about four billion dollars each year. Some estimates indicate that for each dollar paid out, two dollars are unclaimed by companies unaware of their eligibility.

The program supports both Scientific Research (which may be pure or applied research) as well as Experimental Development (the "ED"), which may be the larger component in most companies. Work involved in creating new products or processes, or enhancing/improving existing ones is considered product development, and the key question affecting eligibility is whether this development is experimental in nature.

Some activities that may indicate eligibility:

  • Development of a new product, process, tool, technical procedure
  • Improvement of an existing product, process, tool, technical procedure
  • Investigation of new materials or new ways to do things cheaper, faster or better

Your eligibility for a refund/tax credit is not dependent on whether you were successful in the research or investigation. In fact, failure demonstrates that it was experimental in nature and had technical risk. Companies often overlook expenditures for unsuccessful projects.