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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