Reviewed by Logan Hanson, BSc, CPA. Last verified against CRA guidance on August 31, 2026.
There is no one rate, and any figure quoted without conditions is a simplification. The return depends on four things: corporation type, whether the spending is current or capital, which expenditure categories make up the claim, and the province the work happens in.
The federal program supplies the anchor rate. It applies as an investment tax credit against a qualifying expenditure base, not against gross spend, which is the distinction that makes most published "rate of return" figures wrong. A company that spends $600,000 on an R&D team does not have a $600,000 base. It has whatever the eligible categories add up to, which can be higher once the overhead proxy is included, or lower if much of that payroll sits outside directly engaged work.
Two federal rates exist: an enhanced 35% that is refundable for qualifying claimants, and a basic 15% that is not. Everything else is a question of which one applies and what the base contains.
Two groups, and the second is recent. Canadian-controlled private corporations have always qualified. Since Bill C-15, eligible Canadian public corporations also qualify, for taxation years beginning on or after December 16, 2024. That covers a corporation with a class of shares listed on a designated stock exchange, or one that elected or was designated to be a public corporation, and that is not controlled by non-residents.
The older shorthand that only CCPCs reach 35% is now out of date, and it is still the most repeated claim in guidance written before 2026. A corporation that qualifies for neither category, a non-resident-controlled subsidiary being the clearest case, generally earns 15% non-refundable, reducing tax owing rather than paying out.
Refundability is the word carrying the real weight. A refundable credit is paid as cash even in a year with no tax owing, which is why it matters most to companies still burning capital. A non-refundable credit waits for profit.
One boundary trips people regularly: a partnership is not a corporation. Work performed in a partnership flows through to the partners, who claim on their own returns.
The enhanced rate also has a size limit that is easy to miss. The $6 million expenditure limit is shared among associated corporations, so a group cannot multiply it by adding entities, and it phases out as taxable capital grows between $15 million and $75 million. A company scaling quickly can therefore watch its access to the enhanced rate shrink in the same years its research spending rises, which makes the ceiling of $2.1 million a theoretical maximum rather than a figure most claimants ever see.
The base is assembled category by category, and each has its own rule. Salaries and wages of employees directly engaged in the work form the core. The prescribed proxy then adds a fixed 55% of those eligible salaries in place of tracking actual overhead, which most claimants elect. Arm’s length Canadian contractors count at 80% of the eligible amount where the work is done in Canada by a taxable supplier. Materials count when consumed or transformed, not only consumed.
Capital expenditures are eligible again for qualifying depreciable property acquired after December 15, 2024, reversing the 2012 removal. The treatment is nuanced: some acquisitions earn no credit, and enhanced-rate capital credits are only partially refundable.
A common surprise is what falls outside. A cloud computing or SaaS subscription is not one of the listed expenditure categories on its own, though it may still be an ordinary deductible business expense.
Whether the work itself qualifies is a separate test from any of this, and it is set out in the CRA’s eligibility guidelines.
Provincial credits sit on top of the federal credit, and they are the reason a single national rate cannot exist. Rates, caps and refundability are set province by province: some are refundable, some are not, some restrict refundability to smaller or Canadian-controlled corporations, and at least one province has no dedicated R&D credit at all. The CRA’s provincial and territorial page lists what applies where.
The often-quoted combined ceiling is province dependent, and no single national figure describes it. It is also not a sum of two rates. A provincial credit is generally treated as government assistance and reduces the federal qualifying pool before the federal rate applies, so adding percentages overstates the result.
Eligibility never changes with geography. The province changes the rate, the cap and the refundability. It never changes whether the work counts.
The CRA aims to process a refundable claim accepted as filed within 60 calendar days, and a refundable claim selected for review within 180 days of a complete filing. These are service targets rather than guarantees, and an incomplete filing effectively restarts the clock. The figure of 120 days still circulating online is a pre-2018 standard.
Processing time should not be confused with the filing window. A corporation has 18 months after its fiscal year end to file, so a December 31, 2024 year end must be filed by June 30, 2026. Missing it forfeits the federal credit for that year and, in most provinces, the provincial credit administered on the same return. The filing requirements policy sets out what a complete filing contains.
Take a specialty manufacturer whose engineers spent the year developing a new welding process, with these eligible inputs:
That gives a qualifying expenditure base of $730,650. At the enhanced 35% rate the federal credit is roughly $255,700.
Because this is a qualifying CCPC and the spending is current, that amount is paid as cash even if the company owes no tax for the year, and it sits well under the $6 million limit. Provincial credits then push the total higher, by an amount that depends entirely on the province.
Notice what the example does not produce: a single blended percentage of what the company spent. That number would change the moment any input did.
The honest answer to what SR&ED pays back is 35% or 15% federally, applied to a base built category by category, plus a province-dependent layer, with refundability deciding whether it arrives as cash or as a reduction in tax owing. If you would rather have your own number than a national average, book a free consultation with SRED.ca and bring your salary and contractor totals.
The program is built around work carried out in Canada. Some limited salary costs for employees temporarily working abroad can qualify, subject to caps and conditions, but contractor work performed outside Canada does not attract the arm’s length treatment. Treat foreign R&D as outside the claim unless it has been specifically reviewed.
Yes. Government assistance generally reduces the qualifying expenditure pool before the credit is calculated, so a grant covering part of a project lowers the base the 35% applies to. It rarely makes claiming pointless, but it does change the arithmetic and should be modelled before the money is counted.
It is not lost. Unused investment tax credits carry over under the general ITC rules rather than expiring at year end, so a company that becomes profitable later can still apply them. Confirm the exact carry-back and carry-forward windows for your taxation year before relying on them.
Filing a claim does not itself trigger a review of unrelated tax matters. Claims may be selected for technical or financial review on their own merits, which is a different process from a general audit. Well-documented claims move through it faster, which is the practical reason documentation matters.
Within the 18-month reporting deadline, yes. After that window closes for a given fiscal year the claim is final and additional expenditures cannot be added. That is why the deadline matters more than most claimants expect: it caps corrections, not just first submissions.
This article is general information, not tax advice. Tax figures depend on your corporation type, province, and taxation year.
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