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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affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.