94 /
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, 2014 (see the table "Federal and Provincial/Territorial Tax
Rates for Income Earned by a General Corporation Effective January 1, 2014 and 2015").
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 15% 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 55% of the salaries (incurred after December
31, 2013) 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.
General 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
(141)
(141)
(212)
(283)
(64)
Federal ITC @ 15%
(191)
(191)
(180)
(169)
(202)
Federal tax deduction
668
668
608
548
734
Federal taxes saved
$ 100
$ 100
$ 91
$ 82
$ 110
Provincial tax savings
R&D expenditures
$1,000
$1,000
$1,000
$1,000
$1,000
Federal ITC
(191)
(191)
(180)
(283)
(202)
Provincial ITC
(141)
(141)
(212)
(283)
(64)
Provincial tax deduction
668
668
608
548
734
Provincial taxes saved
$ 73
67
73
66
84
Total tax savings
Federal tax savings
$ 291
$ 291
$ 271
$ 251
$ 312
Provincial tax savings
214
208
285
349
148
Total savings
$ 505
499
556
600
460
Net after-tax cost of R&D
$ 495
$ 501
$ 444
$ 400
$ 540
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