TBA The Biotechnology Initiative

The Voice of Bioscience in Ontario



SR&ED - 2008 Federal Budget changes

For taxation year ends after February 25, 2008:

1) Increase the expenditure limit for the 35% Canadian-controlled Private Corporation rate to $3Million from $2Million

2) Increase the upper limit of the phase out threshold of prior year taxable income from $600,000 to $700,000 (Your expenditure limit from 1) is decreased $10 for every $1 above $400,000 in taxable income – thus when you reach $700,000 in taxable income or above in the prior year to your SR&ED claim, you would not be eligible for the enhanced 35% rate)

3) Increase the taxable capital threshold from $15Million to $50Million, which also affects the enhanced 35% rate

4) For specific situations, allow up to 10% of eligible salary or wages for Canadian resident employees working outside of Canada on a Canadian controlled SR&ED project

As a comparison example:

For a Canadian Controlled Private Corporation, with a Fiscal Year End of February 28, 2008, with taxable income of $400,000 for their FYE February 28, 2007, and within the taxable capital threshold, on $3Million of eligible current expenditures:

Prior to this budget = $700,000 refundable tax credit + $200,000 non-refundable tax credit
After this budget = $1,050,000 refundable tax credit

Note: refundable tax credits can be received as a cash refund if no taxes are otherwise owing, non-refundable credits can only be used to reduce past (3 years) or future (up to 20 years) taxes owing.

CRA will also introduce a new SR&ED claim form and guide, with an eligibility tool, and will review the program’s policies and procedures to ensure they are aligned with current business practices and applied in a consistent manner across Canada. However, no timeline was given for introduction of these administrative changes.