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Scientific research & experimental development
High investment tax credit rates are available for SR&ED expenditures. Forms T661 and 31 must be filed on time in order to benefit from the tax credits. The filing deadline is 18 months after the fiscal year-end date of the company. SR&ED includes basic research, applied research, and experimental development for the purpose of creating or improving materials, devices, products or processes. Scientific research excludes market research or sales promotion, quality control or routine testing, data collection and style changes. The special investment tax treatment for SR&ED is only available for activities carried on within Canada. The reason for the attractiveness of the SR&ED investment tax credits is that they result in substantial cash refunds from the government even in initial years of the company's operations when there are no taxable profits. Both current expenditures and capital expenditures are used in the calculation of the investment tax credit. For companies operating in Ontario, there is an additional tax credit available from the province of Ontario. Due to the complexity of the definitions of basic and applied research and experimental development, the Canadian Government offers a preliminary evaluation of an applicant company's eligibility for the SR&ED investment tax credit. It is worthwhile to allow their specialists to determine eligibility before embarking on the complex process of preparing the T661 submission, to ensure that the substantial time and effort are likely to pay off.
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