Net After-Tax Cost of Performing Research and Development  /  95

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” amounts as follows:

• Reduction of the ITC rate earned by large corporations 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 corporation is eligible to claim the Ontario Business Research Institute Tax Credit the 

net after-tax cost would be $510.

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

Tax Credit) was not previously taxable in Quebec. 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 provincial 

taxable income.

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

assistance programs, visit www.thefundingportal.com. 

General Corporations

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

(131)

(212)

(212)

—

(212)

Federal ITC @ 15%

(192)

(180)

(180)

(212)

(180)

Federal tax deduction

677

608

608

788

608

Federal taxes saved

$    102

$    91

$    91

$   118

$    91

Provincial tax savings

R&D expenditures

$1,000

$1,000

$1,000

$1,000

$1,000

Federal ITC 

(192)

(180)

(180)

(212)

(180)

Provincial ITC

(131)

(212)

(212)

—

(212)

Provincial tax deduction

677

608

508

788

608

Provincial taxes saved

$    81

$    73

$    97

$    126

$    85

Total tax savings

Federal tax savings

$   294

$   271

$   271

$   330

$   271

Provincial tax savings

212

285

309

126

297

Total savings

$   506

$   556

$   580

$   456

$   568

Net after-tax cost of R&D$   494

$   444

$   420

$   544

$   432

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