92  /

Net After-Tax Cost of Performing Research and Development—Continued

Notes 
(1)  This table calculates the net after-tax cost to a general corporation of performing research 

and development (R&D) in the various provinces. The calculations are based on the 

following assumptions:
• The federal and provincial tax rates are those that apply to active business income

earned by a general corporation. 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 General Corporation Effective January 1, 2013 and 2014"). 

If the province’s tax rate changes during the year, the calculations will need to be 

updated.

• The corporation, including all associated companies, has assets and taxable paid-up

capital in excess of $75 million and $50 million respectively in the prior year.

• The corporation’s R&D expenditures are eligible for the 20% 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 that 

incremental R&D expenditures have been incurred by the corporation, and all eligible 

expenditures have been fully deducted in the current taxation year.

• The corporation is able to fully claim federal and provincial investment tax credits

against taxes payable for the year.

• 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.

Large 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)

(65)

Federal ITC @ 20%

(261)

(261)

(246)

(232)

(277)

Federal tax deduction

594

594

536

478

658

Federal taxes saved

$    89

$    89

$    80

$    72

$    99

Provincial tax savings

R&D expenditures

$1,000

$1,000

$1,000

$1,000

$1,000

Federal ITC 

(261)

(261)

(246)

(232)

(277)

Provincial ITC

(145)

(145)

(218)

(290)

(65)

Provincial tax deduction

594

594

536

478

658

Provincial taxes saved

$    59

$    59

$    64

$    57

$    76

Total tax savings

Federal tax savings

$   350

$   350

$   326

$   304

$   376

Provincial tax savings

204

204

282

347

141

Total savings

$   554

$   554

$   608

$   651

$   517

Net after-tax cost of R&D

$   446

$   446

$   392

$   349

$   483

Current as of June 30, 2013

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