Who Can Apply to the SR&ED Tax Incentive Program in Canada
The Scientific Research and Experimental Development (SR&ED) tax incentive is Canada’s flagship R&D tax credit. It helps organizations offset the cost of qualifying research and development performed in Canada through two mechanisms: a deduction against income and an investment tax credit (ITC). This guide explains who can apply for SR&ED, what types of work qualify, and how eligibility differs by entity type and province.
As of December 1, 2025, claimants submit SR&ED with their income tax return using the prescribed forms. Because eligibility hinges on both the claimant’s profile and the nature of the work performed, this article provides a structured checklist you can use to self-assess before filing.
Our objective is to help you determine quickly whether your organization, your project, and your expenditures align with SR&ED policy. When in doubt, verify details against the Canada Revenue Agency (CRA) guidance and provincial R&D credit rules, which can change.
Program Overview
The SR&ED program encourages research and development conducted in Canada by allowing eligible claimants to:
Deduct qualifying SR&ED expenditures from income; and
Earn an SR&ED investment tax credit (ITC), which may be refundable or non‑refundable depending on the claimant type and other rules.
“Who can apply” has two dimensions:
The claimant must be an eligible entity (for example, a Canadian corporation, an individual carrying on a business, a trust with business income, or a partnership where eligible partners claim their share); and
The work must meet SR&ED eligibility criteria, meaning it seeks scientific or technological advancement by resolving uncertainty through systematic investigation and must be performed in Canada.
Claimants include organizations across sectors—manufacturing, software, agrifood, biotech, cleantech, construction, mining, energy, aerospace, automotive, robotics, gaming, and more. SR&ED is industry‑agnostic; the focus is the technical content of the work, not the sector.
Applicant Type Requirements
SR&ED recognizes several claimant types. Each faces distinct refundability and filing rules. At a high level:
Canadian‑Controlled Private Corporations (CCPCs)
Often eligible for enhanced SR&ED ITC rates and refundability on qualifying expenditures, subject to annual expenditure limits and current CRA rules.
Must be taxable and resident in Canada for the relevant period.
Refundability and any enhanced limits can change; verify current thresholds before filing.
Other Corporations (public, foreign‑controlled, or non‑CCPC private)
Generally earn a non‑refundable ITC that may be applied against tax payable and carried forward or back under CRA rules.
Must be taxable and file a T2 corporate return including SR&ED schedules.
Individuals (sole proprietors) carrying on business in Canada
May claim SR&ED when the R&D is conducted as part of the business.
File SR&ED forms with the T1 return using the applicable schedule (for example, T2038‑IND).
Trusts with business income
May claim when SR&ED is undertaken in the course of a business carried on by the trust.
File the SR&ED forms with the trust return.
Partnerships
Partnerships do not earn the ITC directly; the eligible partners claim their share of the partnership’s SR&ED expenditures and ITC according to their interests and CRA rules.
Each partner’s refundability depends on that partner’s status (for example, CCPC vs non‑CCPC).
Non‑profits and Registered Charities
Generally, tax‑exempt entities (registered charities, many non‑profit organizations) cannot claim SR&ED ITCs themselves.
A common approach is for a taxable subsidiary corporation to conduct the SR&ED and file the claim.
If you are a charity or non‑profit, assess your structure and consider whether a taxable entity is the appropriate SR&ED claimant.
Public Sector Bodies and Crown entities
Typically ineligible to claim SR&ED ITCs.
Where public entities fund work performed by a taxable private‑sector organization, the private organization may still claim if it bears the financial risk and owns the SR&ED, subject to contract terms and “third‑party payments” rules.
Key principle: The claimant must carry on business in Canada, bear the financial risk of the work, and—subject to contract terms—own or have rights to the results. Contract R&D can be claimable if structured correctly and performed in Canada.
Size & Scale Criteria
SR&ED does not impose minimum revenue, employee counts, or project budgets. Both startups and large enterprises can qualify, including pre‑revenue companies. The program is designed to be accessible to organizations at all stages, provided the work meets the technical criteria.
What does matter:
Tax status: You must be a taxpayer in Canada (or a partner whose share flows through), filing the appropriate return with SR&ED forms.
Residency and control: Refundability and potential enhanced ITC rules often depend on being a CCPC under the Income Tax Act during the relevant period.
Expenditure limits: Enhanced or refundable treatment can be capped; confirm current‑year thresholds with CRA before relying on any specific number.
Capacity to perform R&D: While headcount is not mandated, you must show that qualified personnel carried out a systematic investigation (for example, engineers, scientists, or experienced technical staff).
Bottom line: There is no size barrier, but you need the capability to plan, conduct, and document SR&ED‑eligible work.
Geographic Eligibility
The SR&ED program incentivizes work performed in Canada. Core rules include:
SR&ED activities must be carried out in Canada to be eligible. Work performed outside Canada is generally not eligible for SR&ED ITCs.
Payments to contractors must be carefully reviewed; only the portion relating to SR&ED performed in Canada is generally eligible.
Materials, testing, or data collection conducted abroad typically do not qualify unless tied to Canadian SR&ED under specific CRA rules.
Provincial and territorial R&D credits can layer on top of the federal SR&ED claim. While the federal program is national, eligibility for a provincial credit depends on where the work and labour are performed and where the claimant is taxable. Key provincial complements include Quebec, Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, and the Atlantic provinces. Stacking is common, but each province has its own definitions, rates, and refundable vs non‑refundable treatment.
If your teams are distributed across provinces, track time and costs by location. Provincial eligibility often depends on where the SR&ED labour occurred.
Project & Activity Requirements
Even if you are an eligible claimant, your work must qualify as SR&ED. CRA policy focuses on the scientific or technological content, not the commercial outcome. In plain language, your project should demonstrate:
Technological or scientific uncertainty
A knowledge gap that cannot be resolved by standard practice or publicly available information at the outset.
Technological or scientific advancement
The work aims to generate new knowledge or expand technological capability, not just apply existing methods.
Systematic investigation
A structured approach is used—formulating hypotheses, designing and executing experiments or tests, analyzing results, and drawing conclusions. Documentation is crucial.
SR&ED‑eligible work can include:
Experimental development to create or improve materials, devices, products, or processes.
Applied research directed toward a practical objective.
Basic research executed to advance scientific knowledge without a specific practical application.
Support work directly related and commensurate to the core SR&ED (for example, data collection, trial fabrication, testing, design, and development activities that assist the experimental work).
Activities that are generally not SR&ED on their own include:
Routine engineering, quality control, or troubleshooting using standard methods.
Commercial production after uncertainties are resolved.
Cosmetic or stylistic changes.
Market research, sales, or administration.
Software feature implementation that does not tackle a technological uncertainty (for example, integrating known libraries in a routine manner).
Sector examples:
Software/technology: Work to overcome limits of scalability, concurrency, determinism, or algorithmic performance that were not solvable by known techniques may qualify. Routine app development without novel technical challenges typically does not.
Manufacturing: Developing a new process window for high‑tolerance fabrication when the physics or metallurgy is not well understood and requires experimentation may qualify; routine line balancing usually does not.
Agrifood/biotech/cleantech: Experimental work to improve yield or stability under uncertain biological or chemical conditions can qualify when approached systematically.
Financial & Operational Criteria
Eligibility also depends on how you structure and document your work and costs.
Tax compliance and filing
Claim SR&ED with the prescribed forms as part of your income tax return for the year. Filing deadlines and statute‑barred dates apply; missing them can forfeit your claim.
Books and records
Maintain contemporaneous documentation: technical logs, experiment plans, test data, version control notes, timesheets, payroll records, invoices, and contracts. Without records, eligibility is at risk.
Employee and contractor costs
Salaries/wages for employees performing eligible SR&ED are central. Contractor costs may be eligible when the SR&ED is performed in Canada and the contract allocates costs appropriately. Clearly define scope and deliverables to align with SR&ED policy.
Ownership and risk
The claimant should bear the financial risk and have rights to the results. If a customer retains the IP and you are paid on a fee‑for‑service basis to execute known steps, eligibility can be limited.
Refundability and carryovers
Refundability varies. CCPCs may be eligible for enhanced refundable ITCs up to an expenditure limit; other corporations typically earn non‑refundable ITCs that can offset tax and be carried forward/back under CRA rules. Always confirm current CRA guidance before modeling cash benefits.
Ineligible Applicants
You are likely ineligible to apply for SR&ED if any of the following apply:
You are a registered charity or tax‑exempt non‑profit without a taxable subsidiary performing the SR&ED.
You are a Crown corporation, municipality, or other public institution.
You do not carry on business in Canada or do not file a Canadian income tax return for the year.
Your R&D was performed outside Canada or by non‑Canadian resources without qualifying Canadian SR&ED.
You cannot demonstrate technological uncertainty, advancement, and systematic investigation with evidence.
Your costs are entirely commercial (for example, marketing, sales, routine production) or relate only to customization or integration using standard methods.
You have no contemporaneous records and cannot substantiate time, costs, or the technical work performed.
Note: Being pre‑revenue or a startup does not make you ineligible. Many early‑stage businesses successfully claim SR&ED.
Special Cases & Exceptions
Contract R&D and IP ownership
If you conduct SR&ED for a customer, eligibility depends on who bears risk and who owns the results. Contracts should clarify ownership, rights to knowledge, and deliverables. Where the payer benefits, “third‑party payments” and “contract payments” rules may apply.
Partnerships and consortia
Partnerships allocate SR&ED to partners based on their interests. Industry associations or consortia may structure work through a taxable entity to ensure claimability.
Universities and public research bodies
Public institutions generally cannot claim; however, private companies funding university research may claim eligible contract costs if the SR&ED is performed in Canada and other conditions are met.
Multinational groups
Canadian subsidiaries of foreign parents can claim SR&ED for qualifying Canadian work. Transfer pricing and intercompany contracts should properly allocate R&D risk and ownership.
Foreign work or testing
Work performed outside Canada is generally excluded. Limited use of foreign testing facilities to validate Canadian SR&ED outcomes will typically not qualify as SR&ED labour; plan accordingly.
Self‑Assessment Checklist
Use this quick checklist to gauge eligibility. A “yes” to most questions suggests you should explore an SR&ED claim.
Entity status
Are you a taxable Canadian entity (corporation, individual in business, trust) or a partner in a Canadian partnership?
If you are a non‑profit or charity, do you have a taxable subsidiary that performed the SR&ED?
Location and structure
Was the experimental work performed in Canada by your employees or Canadian contractors?
Do you bear the financial risk and have rights to the results?
Technical criteria
Did your project begin with a scientific or technological uncertainty not solvable by routine methods?
Did you pursue a technological or scientific advancement, not just apply known techniques?
Did you follow a systematic process (hypothesis, experiment, test, analyze) and keep records?
Expenditures and documentation
Can you substantiate salaries/wages, contractor invoices, materials consumed or transformed, and related costs?
Do you have contemporaneous evidence (timesheets, lab notes, commit histories, test logs)?
Provincial considerations
Do you track SR&ED labour and costs by province to capture provincial/territorial R&D credits?
If you are uncertain, request a pre‑claim consultation or review current CRA policy before filing.
Conclusion
SR&ED eligibility rests on two pillars: claimant type and the nature of the work. Corporations (including CCPCs), individuals in business, trusts, and partners can claim when they conduct eligible R&D in Canada and document a systematic attempt to resolve scientific or technological uncertainty. Refundability and rates vary by entity and year; verify current CRA rules before modeling benefits. Provincial R&D credits can further enhance support if you track work by location.
By aligning your entity structure, contracts, and documentation with SR&ED policy, you can position your organization—regardless of size or sector—to access Canada’s leading innovation tax incentive responsibly and efficiently.
