90 /
Net After-Tax Cost of Performing Research and Development
Notes
(1) This table calculates the net after-tax cost to a Canadian-controlled private corporation
(CCPC) of performing research and development (R&D) in the various provinces. The
calculations are based on the following assumptions:
• The CCPC’s federal and provincial tax rates are those that apply to active business
income eligible for the small business deduction. The provincial tax rates used in
the calculations are those in effect on January 1, 2013 (see the tables "Federal and
Provincial /Territorial Tax Rates for Income Earned by a CCPC Effective January 1, 2013
and 2014"). If the province’s tax rate changes during the year, the calculations will need
to be updated.
• The CCPC’s R&D expenditures are eligible for the 35% federal investment tax credit
(ITC).
• Three quarters of the expenditures relate to R&D salaries and the proxy election has
been made by the corporation, adding 60% of the salaries (incurred after December
31, 2012) to the totals eligible for federal and certain provincial ITCs. The other
quarter of the expenditures relate to materials. The calculations in the table assume
incremental R&D expenditures have been incurred by the corporation.
• The effects of all ITCs have been shown in the current year’s deduction, even though
federal ITCs are actually deducted from the R&D pool in the subsequent year.
Small Corporations
1
B.C.
Alta.
Sask.
Man.
Ont.
2
Federal tax savings
R&D expenditures
$1,000
$1,000
$1,000
$1,000
$1,000
Provincial ITC
(145)
(145)
(218)
(290)
(204)
Federal ITC @ 35%
(457)
(457)
(431)
(406)
(436)
Federal tax deduction
398
398
351
304
360
Federal taxes saved
$ 44
$ 44
$ 39
$ 33
$ 40
Provincial tax savings
R&D expenditures
$1,000
$1,000
$1,000
$1,000
$1,000
Federal ITC
(457)
(457)
(431)
(406)
(436)
Provincial ITC
(145)
(145)
(218)
(290)
(204)
Provincial tax deduction
398
398
351
304
360
Provincial taxes saved
$ 10
$ 12
$ 7
$ 0
$ 16
Total tax savings
Federal tax savings
$ 501
$ 501
$ 470
$ 439
$ 476
Provincial tax savings
155
157
225
290
220
Total savings
$ 656
$ 658
$ 695
$ 729
$ 696
Net after-tax cost of R&D$ 344
$ 342
$ 305
$ 271
$ 304
Current as of June 30, 2013
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