Net After-Tax Cost of Performing Research and Development  /  93

Notes, continued

 

The 2012 federal budget introduced the following changes to the federal scientific research 

and experimental development (SR&ED) Program, which have reduced the ”federal tax 

savings” and increased the “net after-tax cost of R&D” as follows:

• Reduction of the ITC rate earned by CCPCs on expenditures in excess of the

expenditure limit to 15% (from 20%) for taxation years ending after 2013

• Reduction of the eligible amount of expenditures for SR&ED performed by contractors

to 80% (from 100%) for expenditures incurred after 2012

• Reduction of the prescribed proxy rate to 55% (from 60%) on January 1, 2014.

• Elimination of federal ITC on SR&ED capital property (including the right to use such

property) after 2013.

(2)  If the CCPC is also eligible to claim the Ontario Business Research Institute Tax Credit,  

the net after-tax cost would be $281.

(3)  In calculating the net after-tax cost of R&D in Quebec, the provincial ITC (the R&D Wage 

Tax Credit) previously did not reduce the amount of expenditures qualifying for the 

provincial R&D deduction. However, the 2013 Quebec budget (delivered on November 

20, 2012) announced that the R&D Wage Tax Credit earned on expenditures incurred after 

November 20, 2012 will need to be included in income.

For additional information on available R&D investment tax credits, and other government 

assistance programs, visit www.thefundingportal.com.

 CCPCs

1

Que.

3

N.B.

N.S.

P.E.I.

Nfld.

Federal tax savings

R&D expenditures

$1,000

$1,000

$1,000

$1,000

$1,000

Provincial ITC

(281)

(212)

(212)

—

(212)

Federal ITC @ 35%

(396)

(420)

(420)

(494)

(420)

Federal tax deduction

323

368

368

506

368

Federal taxes saved

$    36

40

40

56

40

Provincial tax savings

R&D expenditures

$1,000

$1,000

$1,000

$1,000

$1,000

Federal ITC 

(396)

(420)

(420)

(508)

(420)

Provincial ITC

(281)

(212)

(212)

—

(212)

Provincial tax deduction

323

368

368

506

368

Provincial taxes saved

$    26

$    17

$    11

$      23

$    15

Total tax savings

Federal tax savings

$   432

$   460

$   460

$   550

$   460

Provincial tax savings

 307

229

223

23

227

Total savings

$   739

$   689

$   683

$   573

$   687

Net after-tax cost of R&D$   261

$   311

$   317

$   427

$   313 

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